Boise Company is the exclusive Montana distributor of lawn mowers for a small manufacturing company. It...

Boise Company is the exclusive Montana distributor of lawn mowers for a small manufacturing company. It sells only one model at $650 per unit and for which Boise pays $250. Boise's other variable costs amount to $50 per unit. Fixed costs are $2,800. In April, Boise sold 15 lawn mowers and it sold 20 in May.

Required:

Calculate the following values:

a.	Monthly break-even point in sales dollars
b.	Monthly break-even point in units
c.	Monthly income for April
d.	Monthly income for May
e.	Margin of safety in units for April

Expert Solution

Solution

a.	Monthly break-even point in sales dollars	$5200
b.	Monthly break-even point in units	8 units
c.	Monthly income for April	$ 2,450
d.	Monthly income for May	$ 4,200
e.	Margin of safety in units for April	$ 4,550


A	Sale Price per unit	$ 650.00
B = 250+50	New variable cost per unit	$ 300.00
C =A-B	New contribution margin	$ 350.00
D=C/A	New CM ratio	54%
E	Fixed Cost	$ 2,800.00
G=E/D	Break even point in dollar sales	$ 5,200.00

A	Sale Price per unit	$ 650.00
B	Variable Cost per Unit (15-40%)	$ 300.00
C=A x B	Unit Contribution	$ 350.00
D	Total Fixed cost (263000 x 2)	$ 2,800.00
E=D/C	Breakeven point in units	8.00

Income statement for April
Sales	$ 9,750.00
Variable cost	$ 4,500.00
Contribution margin	$ 5,250.00
Fixed cost	$ 2,800.00
Income	$ 2,450.00

Income statement for May
Sales	$ 13,000.00
Variable cost	$ 6,000.00
Contribution margin	$ 7,000.00
Fixed cost	$ 2,800.00
Income	$ 4,200.00

Sales in April	$ 9,750.00
Breakeven sales	$ 5,200.00
Margin of safety sales (9750-5200)	$ 4,550.00

ekkarill92 answered 1 year ago

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