The following information relates to the only product sold by Harper Company: Sa
ID: 2387245 • Letter: T
Question
The following information relates to the only product sold by Harper Company:Sales price per unit $ 24
Variable cost per unit 18
Fixed costs per year 271,000
a.
Compute the contribution margin ratio and the dollar sales volume required to break even. (Omit the "$" sign in your response)
Break-even sales volume $
b.
Assuming that the company sells 75,000 units during the current year, compute the margin of safety sales volume (dollars). (Omit the "$" sign in your response)
Margin of safety sales volume $
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Explanation / Answer
a. Contribution Margin Ratio = (24-18)/24 = 0.25 or 25%
Break-even in sales volume = 271,000/0.25 = $1,084,000
b. 75,000*$24 = $1,800,000
Margin of safety sales volume = Actual sales – Break even sales = $1,800,000 – 1,084,000 = $716,000
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