Please see Question E 16-25- Thanks Unit sales 1,200 $20,000 ? $80,000 Contribut

Question

Please see Question E 16-25- Thanks

Unit sales 1,200 $20,000 ? $80,000 Contribution margin Fixed costs. Net income ? $800 $ 7,000 ? $82,000 ? $450 Unit contribution margin.... ? $ 15 4,000 2,000 300 1,000 Margin of safety (units). Required Supply the missing data in each independent case. E16-25. Cost-Volume-Profit Relations: Missing Data Following are data from 4 separate companies. Case 1 Case 2 Case 3 Case 4 $120,000 $100,000 $ 60,000 Contribution margin Fixed costs. Net income Variable cost ratio. Contribution margin ratio . . Break-even point (dollars) . Margin of safety (dollars) .. ?$20,000 ? 5,000 $12,000 0.40 40,000 0.50 0.22 ? $25,000 $20,000 Required Supply the missing data in each independent case.

Explanation / Answer

Net income = Contribution margin - Fixed costs

Contribution margin ratio = Contribution margin / sales revenue

Contribution margin ratio = 1 - variable cost ratio

Variable cost ratio = 1 - Contribution margin ratio

Break even point (dollars) = Fixed costs / Contribution margin ratio

Margin of safety (dollars) = Sales revenue - Break even point (dollars)

Case 1 Case 2 Case 3 Case 4 Sales revenue 120,000 100,000 50,000 (20,000/0.40) 45,000 (20,000+25,000) Contribution margin 60,000 50,000 (100,000*0.5) 20,000 35,100 (45,000*0.78) Fixed costs 40,000 45,000 (50,000-5,000) 8,000 (20,000-12,000) 19,500 (25,000*0.78) Net income 20,000 (60,000-40,000) 5,000 12,000 15,600 (35,100-19,500) Variable cost ratio 0.50 (1-0.50) 0.50 0.60 (1-0.40) 0.22 Contribution margin ratio 0.50 (60,000/120,000) 0.50 (1-0.50) 0.40 0.78 (1-0.22) Break-even point (dollars) 80,000 (40,000/0.50) 90,000 (45,000/0.50) 20,000 (8,000/0.40) 25,000 Margin of safety (dollars) 40,000 (120,000-80,000) 10,000 (100,000-90,000) 30,000 (50,000-20,000) 20,000

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