Exercise D3-10 MathTot sells a learning system that helps preschool and elementa

Question

Exercise D3-10 MathTot sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company's income statement from last month is as follows: Total Per Unit $50 17.5 Contribution margin 390,000 $32.5 Sales revenue $600,000 Variable expenses 210,000 Fixed expenses 292,500 Operating income 97,500 What is MathTot's contribution margin ratio? Its variable cost ratio? (Round ratios to 2 decimal places, e.g. 0.38.) Contribution margin ratio Variable cost ratio :3 Compute breakeven sales. (Use the rounded contribution margin ratio calcuated in the previous part to compute Breakeven Sales.) Breakeven sales What is MathTot's margin of safety? Margin of safety

Explanation / Answer

Contribution margin ratio 0.65 :1 (conttribution margin/Sales revenue) (32.5/50) 0.65 Variable cost ratio 0.35 :1 (variable expense/sales revenue) (17.5/50) 0.35 Break even sales $ 450,000 (Fixed expense/contribution margin ratio) (292,500/.65) 450000 Margin of safety $ 150,000 Actual sales -Break even sales 600,000 - 450,000 150,000 Net operating income will increase by $ 65,000 100,000*.65 65,000 operating income $ 115,572 total per unit Sales revenue 646800 55 Variable expenses 238728 20.3 Contrtibution margin 408072 34.7 Fixed expenses 292,500 Operating income 115,572 Variable cost per unit 17.5*116%=$20.3 per unit Selling price per unit 50*110%= 55 per unit Number of tots sold earlier 600,000/50 = 12000 units now sold will be 12000*98%= 11760 units

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