Question

In: Accounting

Given the following Selling Price: 50$ per unit Variable Cost: 40$ per unit Fixed Cost: 80,000$...

Given the following
Selling Price: 50$ per unit
Variable Cost: 40$ per unit
Fixed Cost: 80,000$ per unit

Calculate:
A. Contribution margin as well as the contribution margin ratio

B. Profit(loss) if 7,200 units are sold

C. Margin of safety if 10,100 units are sold

D. Break even point in dollars

Solutions

Expert Solution

Answer to A

Particulars Amt
Sale Price (A) 50
Less: Variable Cost 40
Contribution Margin (B) 10
Contribution Margin Ratio (B/A) 20.00%

Answer to B

Particulars Amt
Sale Price (A)                  50
Less: Variable Cost                  40
Contribution Margin (B)                  10
No of Units Sold (C )            7,200
Total Contribution (B x C)          72,000
Less: Fixed Cost          80,000
Profit (Loss)          (8,000)

Answer to C

Margin of Safety = Total Sales - Break Even Sales

= 10100 - 8000

= 2100 Units

Break Even Sales in Unit = Fixed COst / Contribution Margin

= 80000 / 10

= 8000 Units

Answer to D

Break Even Point in Dollar sales = Fixed Cost / Contribution margin ratio

= 80000 / 0.20

= $400000

ekkarill92 answered 1 year ago
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