BREAK-EVEN UNITS, CONTRIBUTION MARGIN RATIO, MARGIN OF SAFETY
Bandaleria Company's projected profit for the coming year is as follows:
|
|
Total
|
Per Unit
|
|
Sales
|
$2,480,000
|
$20
|
|
Less: Variable expenses
|
1,488,000
|
12
|
|
Contribution margin
|
$ 992,000
|
$ 8
|
|
Less: Fixed expenses
|
716,800
|
|
|
Operating income
|
$ 275,200
|
|
Required:
1. Compute the break-even point in units.
2. How many units must be sold to earn a profit of $640,000?
3. Compute the contribution margin ratio. Using that ratio, compute the additional profit that Bandaleria would earn if sales were $50,000 more than expected.
4. For the projected level of sales, compute the margin of safety in units.