Homework Answers
.1. Contribution = Selling Price - variable Cost = 130- (39+52) = 39.
2. Contribution margin ratio = Contribution / sales = 39/130 = 0.30
3. Break even point = Fixed cost/ Contribution per unit
Fixed cost = 62400+15600+31200+12480 = 121680
Break even point = 121680/39 = 3120 units
4. For this part, we need to do backward calculation.
Profit after tax = 16000 (as per image)
Tax rate is 20%, so profit before tax = 16000/0.8 = 20000
Fixed cost = 121680
Contribution = Fixed cost + profit before tax = 121680+20000= 141680
now, let the sales be x,
Total Sales - total variable cost = total contribution
130x-91x = 141680
39x = 141680
x = 3633 units
Total sales = 3633*130= $472290
Operating Leverage = Contribution/EBIT = 141680/20000 = 7.084
margin of safety (in units) = Actual Sales - Break even sales
Actual sales = 312000/130= 2400, since actual sales are less than break even sales, margin of safety cannot be calculated.
Total sales be = (Fixed cost + desired profit )/ contribution per unit = (121680+ units to be sold * 0.08* 130)/39 = units to be sold
Let units sold be x
X = 4255 units.
Total sales = 4255*130 = 553150
Units increased = (4255-2400)2400 = 77.29%increase in sales.
Let me know if you have any doubts or query in this answer.
and sorry for the answer which i have given before.
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