The section of Waterways that produces controllers for the company provided the

Question

The section of Waterways that produces controllers for the company provided the following information.

Using this information for the controllers, determine the contribution margin ratio, the degree of operating leverage, the break-even point in dollars, and the margin of safety ratio for Waterways Corporation on this product.

Contribution Margin Ratio (Round to 0 decimal places, e.g. 25%.)

Break-even Point in Dollars

Margin of Safety Ratio (Round to 1 decimal place, e.g. 5.2%.)

Sales for month of February 4,000 Variable manufacturing cost per unit $9.75 Sales price per unit $42.50 Fixed manufacturing overhead cost (per month for controllers) $81,000 Variable selling and administrative expenses per unit $3.00 Fixed selling and administrative expenses (per month for controllers) $13,122

Explanation / Answer

Sales Per unit 42.5 Less: Variable cost per unit(9.75+3) 12.75 Contribution per unit 29.75 Contribution margin= (Contribution/Sales)*100 70.00 Fixed Expenses=(81000+13122)= 94122 Contribution margin= 70% Break even point=(Fixed cost/contribution margin) 134460 Sales= 4000*42.50= 170000 Margin of Safety= sales-break even sales= 35540

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