€ ACC117 Final Exam (FA1 + O| ezto.mheducation.com/hm.tpx A company that makes o

Question

€ ACC117 Final Exam (FA1 + O| ezto.mheducation.com/hm.tpx A company that makes organic fertilizer has supplied the following data: Bags produced and sold Sales revenue Variable manufacturing expense Fixed manufacturing expense Variable selling and administrative expense Fixed selling and administrative expense Net operating income 240,000 $1,896,000 $804,000 $520,000 $180,000 $270,000 $122,000 The company's margin o O 140,000 units 0 202.238 units O 125.714 units O 32.105 units f safety in units is closest to: renices Multiple Choice

Explanation / Answer

Sales revenue per unit = 1896000/240000 = 7.90

Variable cost per unit = (804000 + 180000)/240000 = 4.10

Contribution per unit = 7.90 - 4.10 = 3.80

Total fixed cost = 520000 + 270000 = 790000

Break even units = Total Fixed cost / Contribution per unit

= 790000/3.80 = 207894.74 units i.e. 207895 units

Margin of safety = Actual sales units - Break even units

= 240000 - 207895 = 32105

Answer is 32105 units.

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