Question 1 Presto Company makes radios that sell for $25 each. For the coming ye
ID: 2545546 • Letter: Q
Question
Question 1 Presto Company makes radios that sell for $25 each. For the coming year, management expects fixed costs to total $190,200 and variable costs to be $17.50 per unit. [x] Your answer is incorrect. Try again. Compute the break-even point in dollars using the contribution margin (CM) ratio. (Round answer to O decimal places, e.g. 1,225.) Break-even point 25,360 [ Your answer is incorrect. Try again. Compute the margin of safety ratio assuming actual sales are $890,000. (Round margin of safety ratio to 2 decimal places, e.g. 10.50.) Margin of safety Your answer is incorrect. Try again. Compute the sales dollars required to earn net income of $70,800. Required sales 704,800Explanation / Answer
CM ratio = (sales – VC)/ sales
= (25 – 17.5)/25
= .3 or 30%
BEP $ = Fixed cost/ CM ratio
= 190200/.3
= $634000
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Margin safety ratio = Margin of safety in dollars / Total budgeted or actual sales
= (Total sales – BEP sales)/ total sale
= (890000 – 634000)/890000
= 0.2876 or 28.76%
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Required sale for desired profit = (FC + desired profit)/ CM ratio
= (190200 + 70800)/ .3
= $870000
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