Deines Corporation has fixed costs of $1,974,430. It has a unit selling price of

Question

Deines Corporation has fixed costs of $1,974,430. It has a unit selling price of $6.78, unit variable cost of $4.01, and a target net income of $1,513,000.

Compute the required sales in units to achieve its target net income.

Hurly Co. has fixed costs totaling $165,000. Its unit contribution margin is $1.50, and the selling price is $5.50 per unit.

Compute the break-even point in units.

Oakbrook, Inc. reported actual sales of $2,000,000, and fixed costs of $350,000. The contribution margin ratio is 25%.

Compute the margin of safety in dollars and the margin of safety ratio.

Explanation / Answer

1) Contribution margin per unit = 6.78-4.01 =2.77 per unit

Required sales unit = ( 1974430+1513000)/2.77 = 1259000 units

2) Break even point unit = 165000/1.5 = 110000 units

3) Break even sales = 350000/.25 = 1400000

Margin of safety in dollars = 2000000-1400000 = 600000

Margin of safety ratio = 600000*100/2000000 = 30%

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