The following information relates to the only product sold by Harper Company: Sa
ID: 2350653 • 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 253,000
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
a. contribution margin ratio= [(Sales- VC)/Sales]x100 = [(24-18)/24]x100= 25%% Break-even sales volume= Fixed cost/contribution margin ratio = 253,000/25%%= $1012000 b.margin of safety sales volume= [margin of safety/total sales]x100 margin of safety= profit/contribution margin ratio Profit= (75000x24)-(75000x18)-253,000 = $197000 margin of safety= 197000/25%= $788000 margin of safety sales volume= [788000/(75000x24)]x100= 43.778%
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