Lauder Company had fixed costs of 282500 variable costs of 6

Lauder Company had fixed costs of $282,500, variable costs of $645,000, and actual sales amounted to $1,100,000. If the company has a break-even point at $750,000 in sales revenue.

a. Determine the margin of safety expressed in dollars.
$

b. Determine the margin of safety expressed as a percentage of sales. Enter the percentage amount as a whole number (for example, enter 10% as \"10\").
%

c. Determine the contribution margin ratio.
%

d. Determine the operating income.
$

Solution

a. Margin of safety = Actual sales - Break-even point = $1,100,000 - $750,000 = $350,000

b. Margin of safety as a percentage of sales = $350,000 / $1,100,000 = 32%

c. Contribution margin ratio = ($1,100,000 - $645,000) / $1,100,000 = 41%

d. Operating income = $1,100,000 - $645,000 - $282,500 = $172,500