1 Caluculate the breakeven points in units 2 Calcualte the b

1- Caluculate the breakeven points in units

2- Calcualte the breakeven point in sales dollars

3- Calculate the margin of safety in sales dollars

Sales per unit

$55

Manufacturing costs:

Fixed Costs:

Variable Costs:

Direct materials

$9

Direct labor

7

Variable manufacturing overhead

4

Fixed manufacturing overhead

$90,000

Period expenses:

Variable selling & administrative expenses

5

Fixed selling & administrative expenses

24,000

Totals:

$114,000

$25

Units sold:

57,000 units

Solution

Answer to 1

Break Even In Units = Total Fixed Cost / Contribution Per Unit

= 114000 / 30

= 3800 Units

Working Note:

Contribution Per Unit = Sales Price - Variable Cost

= 55 - 25

= 30

Answer to 2

Break Even In dollar Sales = Total Fixed Cost / Contribution margin Ratio

= 114000 / 0.5455

= $209000

Working Note

Contribution Margin Ratio = Contribution Margin / Sales Price

= 30 / 55

= 54.55%

Answer to 3

Margin of Safety in Dollar Sales = Total Sales - Break Even Sales

= 57000 x 55 - 209000

= 3135000 - 209000

= $2926000