Bravo Baking identified the costs below to determine its cost of one unit of pro

Question

Bravo Baking identified the costs below to determine its cost of one unit of product and its monthly operating costs. (TCO 4) 40 Points
Units produced 14,000
Part I Enter your solution in the green cells for each of the following:
Table A Variable Fixed Using the costs from Table A compute
Materials used in baking bread 2.29 A) Breakeven units (rounded to 2 decimal places)
Factory Supervisor Salaries 0.12 B) Break-even sales dollars
Bakers wages 2.29 C) Contribution Margin
Rent for Executive Offices 3,000 D) Contribution Margin Ratio (%)
Sales Commissions 3500
Utilities used in the factory 0.50 Part II Complete the following requirements
Advertising costs 1000 A) If Bravo requires a profit of $5,000 how many units must it sell?
Delivery truck depreciation 400 B) What is the total revenue from A above?
Depreciation on bake ovens 0.07 C) If Bravo actually sells 8,000 units
Interest on bank loan 500 1) What is the margin of safety in Dollars?
2) What is the margin of safety percentage?
Total Costs $5.26 $8,400.00


Price Charged per unit $7.89

Explanation / Answer

A) Breakeven in Units = Fixed Costs/Contribution Margin Contrib Margin = Price Charged per unit - Variable Cost per unit 7.89 - 5.26 = 2.63 (answer to letter C) $8,400/2.63 = 3,193.92 units B)Breakeven in Dollars = Fixed Costs/Contrib Margin Ratio Contrib Margin ratio = CM/price charged per unit 2.63/7.89 = 33.33 percent (answer to letter D) $8,400/.3333 = $25,202.52 PART II: A) Breakeven in units for profit of $5,000= Fixed Costs + Profit/CM $8,400 + 5,000/2.63 = 5,095.06 units B)Total Revenue per above table A Units produced X Price Charged per unit = 14,000 x 7.89 = $110,460 C) 8,000 units sold 1) Margin of Safety in Dollars = Total Sales - Breakeven Sales Total Sales = 8,000 x 7.89= $63,120.00 Breakeven Sales = 5,095.06 X 7.89 = $40,200.02 Answer:$22,919.98 2) Margin of Safety Percentage = Margin of Safety in $/TotalSales $ $22,919.98/$63,120.00 = 36.31 percent

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