Glacial Company estimates that variable costs will be 58.3% of sales, and fixed

Question

Glacial Company estimates that variable costs will be 58.3% of sales, and fixed costs will total $678,000. The selling price of the product is $5.70.

A.) Compute the break-even point in (1) units and (2) dollars. (Round intermediate calculation to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 5,275.)

___________

B.) Assuming actual sales are $1,818,000, compute the margin of safety in (1) dollars and (2) as a ratio. (Round ratio to 0 decimal places, e.g. 20.)

___________

$__________

Explanation / Answer

Break even sales in units ;-

5.70 X = 3.3231 X + 678000

2.3769 X = 678000

X = 285245

Break even sales in Dollar ;-

X = 0.583 X +678000

0.417 X = 678000

X = 1625899

Margin of safety in dollars = 1818000-1625899 =192101

Margin of safety ratio = 192101/1818000= 10.56%

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