The following information relates to the only product sold by Harper Company: Sa
ID: 2350629 • Letter: T
Question
The following information relates to the only product sold by Harper Company: Sales price per unit $ 24 Variable cost per unit 18 Fixed costs per year 256,000 a. Compute the contribution margin ratio and the dollar sales volume required to break even. (Omit the "$" sign in your response) Break-even sales volume $ b. Assuming that the company sells 75,000 units during the current year, compute the margin of safety sales volume (dollars). (Omit the "$" sign in your response) Margin of safety sales volume $Explanation / Answer
Cont pu = Sale price pu - Var cost pu = 24-18 = $6 pu 1. So CM Ratio = COnt pu/SP pu = 6/24 = 25% 2. BEP = FC/Cont pu = 256,000/6 = 42,667 units So $$ Sales for BE = 42,667*$24 = $1,024,000 3. When 75000 units are sold, MoS = Units sold - BE Vol = 75000-42667 = 32333 units MoS in $$ = 32333*$24 = $775,992
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