Exercise D310 MathTot sells a learning system that helps pre

Exercise D3-10 MathTot sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company\'s income statement from last month is as follows: Total Per Unit $50 17.5 Contribution margin 390,000 $32.5 Sales revenue $600,000 Variable expenses 210,000 Fixed expenses 292,500 Operating income 97,500 What is MathTot\'s contribution margin ratio? Its variable cost ratio? (Round ratios to 2 decimal places, e.g. 0.38.) Contribution margin ratio Variable cost ratio :3 Compute breakeven sales. (Use the rounded contribution margin ratio calcuated in the previous part to compute Breakeven Sales.) Breakeven sales What is MathTot\'s margin of safety? Margin of safety

Solution

Contribution margin ratio 0.65 :1 (conttribution margin/Sales revenue) (32.5/50) 0.65 Variable cost ratio 0.35 :1 (variable expense/sales revenue) (17.5/50) 0.35 Break even sales $ 450,000 (Fixed expense/contribution margin ratio) (292,500/.65) 450000 Margin of safety $ 150,000 Actual sales -Break even sales 600,000 - 450,000 150,000 Net operating income will increase by $ 65,000 100,000*.65 65,000 operating income $ 115,572 total per unit Sales revenue 646800 55 Variable expenses 238728 20.3 Contrtibution margin 408072 34.7 Fixed expenses 292,500 Operating income 115,572 Variable cost per unit 17.5*116%=$20.3 per unit Selling price per unit 50*110%= 55 per unit Number of tots sold earlier 600,000/50 = 12000 units now sold will be 12000*98%= 11760 units