Managerial Accounting (Extra Credit) Name 1. (6 points) McCallen Company expects

Question

Managerial Accounting (Extra Credit) Name 1. (6 points) McCallen Company expects to produce and sell 500 units next month. Data on costs follows: Per unit information: Selling price Variable manufacturing costs Variable selling costs $8.00 2.75 0.25 Fixed costs: Fixed manufacturing costs Fixed selling costs Required: A. What is the break-even point in units? B. What is the break-even point in sales dollars? C. What is the expected operating income for next month? D. What is the margin of safety in dollars? E. What is the break-even point in units if fixed manufacturing costs increase by $500? F. What is the break-even point in units if variable manufacturing costs decrease by $0.75? $1,000 125

Explanation / Answer

Answer:-1)-BEP in units= Fixed costs/Contribution margin per unit

=$1125/$5 per unit =225 units

2)-BEP in sales dollars= Fixed costs/Contribution margin ratio

=$1125/62.5% =$1800

3)-Opreating income:-

Sales-Variable cost- Fixed costs

=$4000-$1500-$1125 = $1375

4)-Margin of safety in dollars =Profit/ Contribution margin ratio

=$1375/62.5% =$2200

5)-BEP in units =$1125+$500/62.5% =$2600

6)-BEP in units=$1125/$5.75 per unit =196 units

Explanation:-

Contribution margin ratio=Selling price per unit-Variable cost per unit

=$8 per unit-($2.75+$.25) = $5 per unit

Contribution margin ratio=(Contribution margin per unit/Selling price per unit)*100

=($5 per unit/$8 per unit)*100

=62.5%

Total variable costs=Variable manufacturing+ Variable selling costs

=($2.75+.$.25)*500 units=$1500

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.