Question

Ivanhoe Bucket Co., a manufacturer of rain barrels, had the following data for 2019.

Sales		2,830	units
Sales price		$50	per unit
Variable costs		$35	per unit
Fixed costs		$16,980

What is the contribution margin ratio?

Contribution margin ratio

Type your answer here

%

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What is the break-even point in dollars?

Break-even point

$Type your answer here

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What is the margin of safety in dollars and as a ratio?

Margin of safety		$
Margin of safety ratio			%

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Answer 1

Contribution margin ratio = 30%

Breakeven point in dollar= $56,600

Margin of safety	1,698
Margin of safety ratio	60%

Working

A	Sale Price per unit	$                   50.00
B	Variable Cost per Unit	$                   35.00
C=A - B	Unit Contribution	$                   15.00
D	Total Fixed cost	$           16,980.00
E=D/C	Breakeven point in units	1,132
F= E x A	Breakeven in sales dollars	$           56,600.00
G= C/A	Contribution margin ratio (CM per unit/ sales price)	30%
H	Actual sales units	2,830
I	Breakeven sales units	1,132
J=H-I	Margin of safety	1,698
K=J/H	Margin of safety ratio	60%