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The information is extracted from financial records of roomy company for last year: -Number of unit...

The information is extracted from financial records of roomy company for last year:
-Number of unit sold (30,000 units)
-Unit selling price ($200 per unit)
-variable expenses per unit ($ 140 per unit)
-fixed expenses ($1,200,000)

1)what is the unit contribution margin?
2)what is the contribution margin ration?
3) what is the net operating income for last year?
4)what is the break-even point in unit sales?
5)what is the break-even point in dollar sales?
6)what is the company's margin of saftey in dollars?
7)what is the company's margin of saftey in percentage terms?
8)how many units are to be sold to earn a target profit of $840,000?
9)what is the amount of dollar sales required to earn a target profit of $1,140,000?

Solutions

Expert Solution

1.Unit contribution margin=selling price per unit-variable cost per unit

Unit contribution margin=$200-$140

Unit contribution margin=$60 per unit

2.Contribution margin ratio=(Contribution per unit/selling price per unit)*100

Contribution margin ratio=(60/200)*100

Contribution margin ratio=30%
3.Net operating income is computed as:

4.Break-even point in unit sales=Fixed costs/Contribution per unit

Break-even point in unit sales=$1,200,000/$60

Break-even point in unit sales=20,000 units

5.Break-evev pont in dollar sales=Fixed costs/Contribution margin ratio

Break-even point in dollar sales=$1,200,000/30%
Break-even point in dollar sales=$4,000,000

6.Margin of safety in dollars=Total sales-Break-even sales

Margin of safety in dollars=(30,000*200)-$4,000,000

Margin of safety in dollars=$6,000,000-$4,000,000

Margin of safety in dollars=$2,000,000

7.Margin of safety in percentage=Margin of safety sales in dollars/Total sales in dollars

Margin of safety in percentage=$2,000,0000/$6,000,000

Margin of safety in percenatge=33.33%
8.Number of units sold to earn target profit=(Target profit+Fixed expenses)/Contribution margin per unit

Number of units sold to earn target progit=($840,000+$1,200,000)/ $60

Number of units sold to earn target profit=$2,040,000/$60

Number of units sold to earn target profit=34,000 units

9.Dollar sales required to earn target profit=(Target profit+Fixed expenses)/Contribution margin ratio

Dollar sales required to earn target profit=($1,140,000+$1,200,000)/ 30%

Dollar sales required to earn target profit=$2,340,000/30%

Dollar sales required to earn target profit=$7,800,000

ekkarill92 answered 1 year ago
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