Use this income statement to answer the questions that follow. Sales ($50 per unit) $5,000 Less:...
Use this income statement to answer the questions that
follow.
| Sales ($50 per unit) | $5,000 | |||
| Less: Cost of goods sold ($32 per unit) | 3,200 | |||
| Gross margin | 1,800 | |||
| Less operating expenses: | ||||
| Salaries | $800 | |||
| Advertising | 400 | |||
| Shipping ($2 per unit) | 200 | 1,400 | ||
| Operating Income | $ 400 |
|
Breakeven point in units?: |
|
|
Breakeven point in dollars?:
|
|
| Margin of safety in units |
Homework Answers
1) Contribution Margin per unit = Selling Price per unit - Variable cost per unit
Variable cost per unit = Cost of goods sold+Shipping per unit
= $32+$2 = $34 per unit
Contribution per unit = $50 - $34 = $16 per unit
Total Fixed Costs = Salaries+Advertising = $800+$400 = $1,200
Break Even Point in units = Total Fixed Cost/Contribution Margin per unit
= $1,200/16 per unit = 75 units
2) Break Even Point in dollars = Break even units*Selling price per unit
= 75 units*$50 per unit = $3,750
3) Current Sales level in units = Sales/Selling price per unit
= $5,000/$50 per unit = 100 units
Margin of Safety in units = Current sales in units - Break even point in units
= 100 units - 75 units = 25 units
4) Margin of Safety in Dollars = Margin of Safety in units*Selling price per unit
= 25 units*$50 per unit = $1,250
Add Answer to:
Use this income statement to answer the questions that
follow.
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$5,000
Less:...
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