Q Company makes radios that sell for $40 each. For the coming year, management e
ID: 2345624 • Letter: Q
Question
Q Company makes radios that sell for $40 each. For the coming year, management expects fixed costs to total $181,299 and variable costs to be $28 per unit.A.) Compute the break-even point in dollars using the contribution margin (CM) ratio
B.) Compute the margin of safety ratio assuming actual sales are $749,710
C.) Compute the sales dollars required to earn net income of $210,621.
Please post how you solved it as well because I want to know how to actually solve. Thank you so much for any help!
Explanation / Answer
Compute the break-even point in dollars using the contribution margin (CM) ratio. (Round answer to 0 decimal places, e.g. 41.) (29 - 18) / 29 = 38% contribution margin ratio. 196,190 / 0.38 = $516,289 (rounded) Compute the margin of safety ratio assuming actual sales are $749,300. (Round answer to one decimal place.) (749,300 - 516,289) / 749,300 = 31.1% Compute the sales dollars required to earn net income of $119,168. (Round answer to 0 decimal places, e.g. 41.) (196,190 + 119,168) / 0.38 cont. margin ratio = $829,889
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