Question

Exercise 19-17 Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2016. Sales Sales price Variable costs Fixed costs 2,500 units $40 per unit $26 per unit $19,600 What is the contribution margin ratio? (Round answer to o decimal places, e.g. 5,275.) Contribution margin ratio LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS What is the break-even point in dollars? (Round intermediate calculation and final answers to 0 decimal places, e.g. 5,275.) Break-even points LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS What is the margin of safety in dollars and as a ratio? (Round ratio to 2 decimal places, e.g. 12.25.) Margin of safety $ Margin of safety ratio LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS If the company wishes to increase its total dollar contribution margin by 40% in 2017, by how much will it need to increase its sales if selling price per unit, variable price per unit and total fixed costs remain constant? (Round answer to 0 decimal places, e.g. 2,520.) Total increase in sales required:

Answer 1

Sales	2500	units
Sales Price	$40	per unit
Variable Costs	$26	per unit
Fixed Costs	$19,600
Contribution Margin Ratio
=Contribution/Sales
=(40-26)/40
35%
BEP in Dollars
=Fixed Costs/Contribution Margin Ratio
=19600/35%
$56,000
Margin of Safety ($)
=Sales-BEP in Dollars
=(2500*40)-56000
$44,000
Margin of Safety (%)
=Margin of Safety in $ / Sales in $
=44000/(2500*40)
44.00%
Total increase in sales required:
Existing Contribution	$35,000
+Increase in Contribution required	40%
Total Contribution required	$49,000
/Contribution Margin Ratio	35%
Total Sales required	$1,40,000
-Current Sales	-$1,00,000
Total increase in sales required	$40,000