Calculate the unknowns for the following situations based on the given data. Act

Question

Calculate the unknowns for the following situations based on the given data.

Actual Total Sales Revenue

$400,000

Total Fixed Cost

$75,000

Unit Variable Cost

$15

Contribution Margin Ratio

40%

Calculate the:

A) Breakeven point in sales dollars

B) Unit selling price.

C) Unit contribution margin.

D) Breakeven point in units.

E) Margin of Safety

Actual Total Sales Revenue

$400,000

Total Fixed Cost

$75,000

Unit Variable Cost

$15

Contribution Margin Ratio

40%

Explanation / Answer

A
Break-even Point (dollar) = Total Fixed Cost / Contribution Margin Ratio
= 75000 / 0.4 $187500

B
Let the Unit Selling Price be 'X'
Unit Variable Cost = $15
Unit Contribution Margin = x - 15
But it is 40% of Unit Selling Price,
0.4*x = x - 15
x = $25

C
Unit Contribution Margin = 40%*25 = $10

D
Breal-even Point (units) = Total Fixed Cost / Unit Contribution Margin
= 75000 / 10 = 7500 units

E
Margin of Safety = Actual Sales - Break Even Sales
= $400000 - $187500
= $212500

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