Question

Cullumber Bucket Co., a manufacturer of rain barrels, had the following data for 2019.

Sales		2,260	units
Sales price		$50	per unit
Variable costs		$30	per unit
Fixed costs		$20,340

What is the contribution margin ratio?

Contribution margin ratio

enter the Contribution margin ratio in percentages

%

  

  

What is the break-even point in dollars?

Break-even point

$enter the break-even point in dollars

  

  

What is the margin of safety in dollars and as a ratio?

Margin of safety		$enter the margin of safety in dollars
Margin of safety ratio		enter the margin of safety ratio in percentages	%

  

  

If the company wishes to increase its total dollar contribution margin by 30% in 2020, 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?

Total increase in sales required:		$enter a dollar amount

  

Answer 1

a) Contribution margin per unit = $50 - $30 Contribution margin per unit = $20 Contribution margin ratio = $20/$50 Contribution margin ratio = 40% b) Break even point in dollars = Fixed costs/Contribution margin ratio Break even point in dollars = $20,340/40% Break even point in dollars = $50,850 c) Total sales = 2,260*$50 Total sales = $113,000 Margin of safety in dollars = Sales - Break even sales Margin of safety in dollars = $113,000 - $50,850 Margin of safety = $62,150 Margin of safety ratio = $62,150/$113,000 Margin of safety ratio = 55% d) Total increase in sales required = $113,000*30% Total increase in sales required = $33,900 Note: Increase in contribution margin = Increase in sales