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UX Corporation sells a single product for $40. Its management estimates the following revenues and costs...

UX Corporation sells a single product for $40. Its management estimates the following revenues and costs for the year 2020:
Net sales $420,000 Selling expenses—variable $22,000
Direct materials 97,500 Selling expenses—fixed 19,000
Direct labour 62,700 Administrative expenses—variable 9,400
Manufacturing overhead—variable 18,400 Administrative expenses—fixed 9,600
Manufacturing overhead—fixed 11,720
Assuming fixed costs and net sales are spread evenly throughout the year, determine YUX’s monthly break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 5,275.)
Monthly break-even in units units
Monthly break-even in dollars $
Calculate the contribution margin ratio, the annual margin of safety ratio, and the annual profit. (Round answers to 0 decimal places, e.g. 15 or 15%.)

Contribution margin ratio %
Annual margin of safety ratio %
Annual profit $

Solutions

Expert Solution

Number of estimated sales in units = $ 420,000 / $ 40 = 10,500 units

Direct materials $ 97,500
Direct labor 62,700
Manufacturing overhead : Variable 18,400
Selling expenses : Variable 22,000
Administrative Expenses : Variable 9,400
Total Variable Costs $ 210,000

Variable cost per unit = $ 210,000 / 10,500 units = $ 20

Contribution margin per unit = Selling price per unit - Variable cost per unit = $ 40 - $ 20 = $ 20

Contribution margin ratio = Contribution Margin per Unit / Selling Price per Unit = $ 20 / $ 40 = 0.50 or 50 %

Total annual fixed costs = $ ( 11,720 + 19,000 + 9,600) = $ 40,320

Monthly fixed costs = $ 40,320 / 12 = $ 3,360

Monthly break-even in units = Fixed Costs / Contribution Margin per Unit = $ 3,360 / $ 20 = 168 units

Monthly break-even in dollars = Fixed Costs / Contribution Margin Ratio = $ 3,360 / 50 % = $ 6,720

Annual break-even in units = 168 x 12 = 2,016

Annual break-even in dollars = 2,016 x $ 40 = $ 80,640

Annual margin of safety ratio = ( Actual Sales Revenue - Break-even Sales Revenue ) / Actual Sales Revenue = $ ( 420,000 - 80,640) / $ 420,000 = 80.80 %

Annual profit = Total Contribution Margin - Annual Fixed Costs = 10,500 x $ 20 - $ 40,320 = $ 169,680

ekkarill92 answered 1 year ago
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