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    تمارين 22

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    Maristella Gaton
    The document contains examples calculating break-even points, margins of safety, and contribution margin income statements for various companies. It provides the sales price, variable costs, fixed costs, and actual sales for each company, and shows the step-by-step workings to determine the break-even point in units and dollars, margin of safety in units and dollars, and contribution margin income statement.

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    تمارين 22

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    Maristella Gaton
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    The document contains examples calculating break-even points, margins of safety, and contribution margin income statements for various companies. It provides the sales price, variable costs, fixed costs, and actual sales for each company, and shows the step-by-step workings to determine the break-even point in units and dollars, margin of safety in units and dollars, and contribution margin income statement.

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    The document contains examples calculating break-even points, margins of safety, and contribution margin income statements for various companies. It provides the sales price, variable costs, fixed costs, and actual sales for each company, and shows the step-by-step workings to determine the break-even point in units and dollars, margin of safety in units and dollars, and contribution margin income statement.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    492 views4 pages

    تمارين 22

    Uploaded by

    Maristella Gaton
    The document contains examples calculating break-even points, margins of safety, and contribution margin income statements for various companies. It provides the sales price, variable costs, fixed costs, and actual sales for each company, and shows the step-by-step workings to determine the break-even point in units and dollars, margin of safety in units and dollars, and contribution margin income statement.

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    BE 158

    Kettle Goods Company has a unit selling price of $500, variable cost per unit $300,
    and fixed
    costs of $170,000.
    Instructions
    Compute the break-even point in units and in sales dollars.
    Solution 158 (4 min.)
    Contribution margin per unit= 500-300=200

    $500X − $300X − $170,000 = 0


    BEP in units = 17000/200= 850 units
    BEP in dollars = 850 units × $500 = $425,000

    Contribution margin ratio= 200/800*100%=25%


    BEP in dollars =17000/25% = $425,000

    BE 159
    Manhattan Cookery reported actual sales of $2,000,000, and fixed costs of $400,000.
    The
    contribution margin ratio is 25%.
    Instructions
    Compute the margin of safety in dollars and the margin of safety ratio.

    Solution 159 (4 min.)


    BEP in dollars: $400,000 ÷ 25% = $1,600,000
    Margin of safety in dollars: $2,000,000 − $1,600,000 = $400,000
    Margin of safety ratio: $400,000 ÷ $2,000,000 = 20%

    BE 160
    The following monthly data are available for Marketplace, Inc. which produces only
    one product
    which it sells for $18 each. Its unit variable costs are $8, and its total fixed expenses
    are $15,000.
    Actual sales for the month of May totaled 2,000 units.
    Instructions
    Compute the margin of safety in units and dollars for the company for May.

    Solution 160 (4 min.)


    Contribution margin per unit= 18-8=10

    BEP in units: 15000/10=1500 units


    BEP in = X = 1,500 units
    BEP in dollars = 1500 units × $18=27000

    Units at current sales level = 2,000*18=36000


    Margin of safety=36000-27000=9000
    Margin of safety = (2,000 – 1,500) × $18 = $9,000
    Sales can drop by $9,000 before the company incurs a l
    Ex. 177
    Down Company has a unit selling price of $500, variable cost per unit of $300, and
    fixed costs of
    $220,000.
    Instructions
    Compute the break-even point in units and in sales dollars.

    Solution 177 (5 min.)


    $500X – $300X – $220,000 = 0
    Break-even point in units = 1,100 units ($220,000 ÷ $200)
    Break-even point in dollars = 1,100 units × $500 = $550,000

    Ex. 178
    Alley Company makes student book bags that sell for $20 each. For the coming year,
    management expects fixed costs to be $240,000. Variable costs are $15 per unit.
    Instructions
    (a) Compute break-even sales in dollars using the mathematical equation.
    (b) Compute break-even sales using the contribution margin ratio.
    (c) Compute margin of safety ratio assuming actual sales are $1,200,000.
    (d) Compute the sales required to earn net income of $120,000, using the
    mathematical
    equation.
    Solution 178 (19–24 min.)
    Contribution margin per unit=

    20-15=5

    (a) Break-even Sales = Variable Costs + Fixed Costs


    X = .75X + $240,000
    .25X = $240,000
    X = $960,000

    240000/5=48000 units

    (b) Contribution Margin per Unit = Unit Selling Price – Unit Variable Cost
    CM = $20 – $15 = $5
    Contribution Margin per Unit
    Contribution Margin Ratio = —————————————

    Unit Selling Price

    CM Ratio = $5 ÷ $20 = 25%

    Fixed Costs
    Break-even Sales = ————————————
    Contribution Margin Ratio

    = $240,000 ÷ 25% = $960,000


    (c) Sales $1,200,000
    Less: Break-even Sales 960,000
    Margin of Safety $ 240,000

    Margin of Safety
    Margin of Safety Ratio = ———————
    Actual Sales

    = $240,000 ÷ $1,200,000 = 20%

    Fixed Costs + Targeted Net Income

    (d) Required Sales =________________________________

    Contribution Margin per Unit

    $240,000 + $120,000
    ___________________= 72000 units
    5

    20X72000 = $1,440,000

    240000+120000
    ________________=1440000

    25%

    Ex. 179
    Wayman Company developed the following information for the product it sells:
    Sales price $50 per unit
    Variable cost of goods sold $23 per unit
    Fixed cost of goods sold $800,000
    Variable selling expense 10% of sales price
    Variable administrative expense $2.00 per unit
    Fixed selling expense $400,000
    Fixed administrative expense $300,000
    For the year ended December 31, 2008, Wayman Company produced and sold
    100,000 units of
    product.
    Instructions
    (a) Prepare a CVP income statement using the contribution margin format for
    Wayman
    Company for 2008.
    (b) What was the company's break-even point in units in 2008? Use the contribution
    margin
    technique.
    (c) What was the company's margin of safety in dollars in 2008?

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