Question

Waterways Continuing Problem 06 a (Part 3)

The section of Waterways that produces controllers for the company provided the following information.

Sales in units for month of February		4,100
Variable manufacturing cost per unit		$11.00
Sales price per unit		$46.00
Fixed manufacturing overhead cost (per month for controllers)		$83,000
Variable selling and administrative expenses per unit		$2.80
Fixed selling and administrative expenses (per month for controllers)		$11,990

Using this information for the controllers, determine the contribution margin ratio, the degree of operating leverage, the break-even point in dollars, and the margin of safety ratio for Waterways Corporation on this product.

Contribution Margin Ratio (Round to 0 decimal places, e.g. 25%.)			%
Degree of Operating Leverage (Round to 2 decimal places, e.g. 5.25.)
Break-even Point in Dollars		$
Margin of Safety Ratio (Round to 1 decimal place, e.g. 5.2%.)			%

Answer 1

Answer
sales    (4100* 46)	$     188,600
less:Variable manufacturing cost (11 * 4100)	-$       45,100
Variable selling    (2.8*4100 )	-$       13,440
contribution margin	$     130,060
less:Fixed cost    (83000 + 11990 )	-$       94,990
net income	$       35,070
a)Degree of operating leverage =Contribution margin /net income
130060 / 35070
3.71
b)contribution margin ratio = 130060 / 188600 = .69 or 69%
Break even point sales = Fixed cost /CM ratio
94990 / .69
$137,667
Margin of safety sales = actual sales -BEP sales
188600- 137667
50933
MOS ratio = margin sales /Actual sales
50933 / 188600
27.01%