sagnmentMandohnvokers assignments takeAssignmentSessionLocators assignment take&
ID: 2580625 • Letter: S
Question
sagnmentMandohnvokers assignments takeAssignmentSessionLocators assignment take&nprogress;, false eBook Calculator Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $13.50 per string. The varlable costs per string are as follows: Direct materials Direct labor Variable factory overhead Variable selling expense Fixed manufacturing cost totals $604,344 per year. Administrative cost (all fixed) totals $443,424. Comer expects to sell 201,500 strings cf $1.87 1.70 0.57 0.42 ight next year Required: ): Calculate the break-even point in units 169,284 Xunits 2. Calculate the margin of safety in units units 3. Calculate the margin of safety in dollars 4. Conceptual Connection: Suppose Comer actually experiences a price decrease next year while all other costs and the number of units sold remain the same. Would this increase or decrease risk for the company? (Hint: Consider what would happen to the number of break-even units and to the margin of safety.) Check My Work PreviousNext 0 8 9Explanation / Answer
Answer 1 Calculation of break even point in units Break even point in units = Fixed cost / Contribution margin per unit Fixed cost = $6,04,344 Contribution margin per unit = Selling price per unit - Variable cost per unit Selling price per unit = $13.50 Variable cost per unit = $1.87 + $1.70 + $0.57 + $0.42 = $4.56 Contribution margin per unit = $13.50 - $4.56 = $8.94 Break even point in units = $6,04,344 / $8.94 = 67600 units Answer 2 Calculation of margin of safety in units Margin of safety in units = Expected sales - Break even sales = 201500 units - 67600 units = 133900 units Answer 3 Margin of safety in dollars = Margin of safety in units * Selling price per unit = 133900 units * $13.50 = $18,07,650 Answer 4 Price decrease will lead to higher break even point in units and margin of safety will come down.This will increase the risk for the company.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.