Glacial Company estimates that variable costs will be 63.2% of sales, and fixed costs will total...

Glacial Company estimates that variable costs will be 63.2% of sales, and fixed costs will total $655,000. The selling price of the product is $3.90.

Compute the break-even point in (1) units and (2) dollars.

a. Break even sales __ units

b. Break even sales __ $$

Assuming actual sales are $2,115,000, compute the margin of safety in (1) dollars and (2) as a ratio.

a. Margin of safety __ $$

b. Margin of safety ratio (as percentage)

Expert Solution

variable costs	63.20%
Contribution	36.80%
Selling Price per Unit	3.90
Contribution per Unit	1.44
Fixed Cost	655,000

1
a
Breakeven Units	=	Fixed Cost	/	Contribution per Unit
Breakeven Units	=	655,000	/	1.44
Breakeven Units	=	456,382.39

b
Breakeven Sales	=	Breakeven Units	*	Selling Price per Unit
Breakeven Sales	=	456,382	*	3.90
Breakeven Sales	=	1,779,891

2
a
Margin of saftey($)	=	Current Sales Units	-	Break Even Sales
Margin of saftey($)	=	2,115,000.00	-	1,779,891.30
Margin of saftey($)	=	335,108.70

b
Margin of saftey	=	(Current Sales Units - Breakeven Units)	/	Current sales Units
Margin of saftey	=	(2115000-1779891)	/	2,115,000.00
Margin of saftey	=	335,109.00	/	2,115,000.00
Margin of saftey		15.84%

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