nt CALCULATOR PRINTER VERSIONBACK Exercise 516 Glacial Compa

nt CALCULATOR PRINTER VERSIONBACK Exercise 5-16 Glacial Company estimates that variable costs will be 67.8% of sales, and fixed costs will total $705,000. The selling price of the product is $4.20. X Your answer is incorrect. Try again. Compute the break-evenpoint in 1 units and 2 dollars (Round intermediate calculation to 3 decimal places, eg 0 527 (52.7%) and final ans er decimal places,e.g.5,275 (1) Break-even sales (2) Break-even sales units VIDEO SIMILAR EXERCISE LINK TO TEXT Your answer is incorrect. Try again. Assuming actual sales are $2,589,000, compute the margin of safety in (1) dolilars and (2) as a ratio. (Round ratio to (1) Margin of safety (2) Margin of safety ratio decimal places, e.g 20.)

Solution

a) 1) Break even sales        5,21,295 Units 2) Break even sales $ 21,89,441 Working: Break even is the level at which there is no profit earned or no loss incurred. a.Calculation of Contribution Margin per unit Sales Price per unit $    4.200 Less Variable cost per unit $         4.20 x 67.8% $    2.848 Contriution Margin per unit $    1.352 b. Contribution Margin(CM) ratio = Contribution Margin / Sales = $                1.352 / $    4.200 = 32.200% c. Break even point in unit sales = Fixed Costs / Cm per unit = $          7,05,000 / $    1.352 =              5,21,295 d. Break even in sales dollars = Fixed Costs / Cm Ratio = $          7,05,000 / $    0.322 = $       21,89,441 b) 1) Margin of safety $   3,99,559 2) Margin of safety ratio 15% Working: Margin of safety is the sales level in excess of Break even level. Margin of safety = Actual Sales - Break even sales = $ 25,89,000 - $       21,89,441 = $   3,99,559 Margin of safety = Margin of safety in sales dollar / Actual sales = $ 3,99,559 / $          25,89,000 = 15%