Super Gutter sells pipes for $11 each. The unit variable costs per pipe are $8.00. Fixed...

Super Gutter sells pipes for $11 each. The unit variable costs per pipe are $8.00. Fixed costs total $4,820.

Required:

7. What is the contribution margin per pipe?

8. What is the break-even point in dollars?

9. How many pipes must be sold to earn a pre-tax income of $5,000?

10. What is the margin of safety assuming 1,800 pipes are sold?

Solutions

Expert Solution

Solution


Unit Selling Price	$11
Unit Variable Cost	$8
Contribution	$3
Fixed Costs	$4,820

7
Contribution Margin per Pipe is $3

8
Break Even Point in dollars
Fixed Costs / Contibution
$4820 / $3
1607 units

Break Even Point in dollars
1607 * $11
$17,677

9
Pipes to sold to earn $5000
Profit to be made	$5,000
Add - Fixed Cost	$4,820
Contribution in value (a)	$9,820
Contibution Per unit (Given) (b)	$3
Units to be sold for $5000 Profit (a/b)	3273

10
Margin of Safety assuming 1800 pipes are sold
Margin of Safety = Sales - Break even Sales

Break Even Units = 1607 (calculated in 8 point)
Margin of Saftey = 1800 - 1607
Margin of Saftey = 193 units
*Margin of Saftey in value = 193 units11 = $2123**

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ekkarill92 answered 1 year ago

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