Brunswick Corporation sells bowling balls and has developed the following inform

Question

Brunswick Corporation sells bowling balls and has developed the following

information:

Sales price $70 per unit

Variable cost of goods sold $26 per unit

Fixed cost of goods sold $500,000

Variable operating expenses $950,000

Fixed operating expenses $650,000

For the year ended December 31, 2015, Brunswick Corporation produced and

sold 100,000 bowling balls.

Instructions-show all computations

Prepare a detailed CVP income statement using the contribution

margin format for Brunswick Corporation for 2015.

(b) Compute the contribution margin per unit.

(c) Compute the contribution margin ratio.

(d) Compute the break-even point in dollars.

(e) Compute the margin of safety in dollars.

(f) Compute the margin of safety ratio.

(g) Compute the number of bowling bag to be sold to earn a target

income of $1,500,000.

Explanation / Answer

Brunswick Corporation All Amounts in $ Income Statement for 2015 (b) & (c) Sales 7000000 Less : Variable Costs Cost of Goods Sold 2600000 Operating Expenses 950000 3550000 $ 9.50 per unit Contribution Margin 3450000 Contribution Margin per unit 34.5 $ Contribution Margin Ratio 49.29% (d) Breakeven point in dollars is the point where Sales = Costs Let the number of units sold for breakeven be X Thus, 70X - 26X - 9.5X = $ 500,000 + $ 650,000 = $ 1,150,000 Hence, 34.5X = $ 1,150,000 or X = $ 1,150,000 / $ 34.50 = 33333 units Thus, the breakeven point in dollars is 33,333 X $ 70 = 2333333 $ (e) Margin of Safety = Actual Sales - Breakeven Sales Hence, Margin of Safety = $ 7,000,000 - $ 2,333,333 = $ 4,666,667. (f) Margin of Safety Ratio = $ 4,666,667 / $ 7,000,000 = 66.67% (g) Let us assume the total number of bowling bags sold as X Hence, 70X - 26X - 9.5X - $ 1,150,000 = $ 1,500,000 Thus, 34.5X = $ 2,650,000 or X = $ 2,650,000 / $ 34.5 = 76812 bowling bags

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