The following is Alsatia Corporation\'s contribution format income statement las

Question

The following is Alsatia Corporation's contribution format income statement last month:
Sales : $1,644,500
Variable expenses: 920,000
Contribution margin: 724,500
Fixes expenses: 359,100
Net operating income: $ 365,400
The company has no beginning or ending inventories and produced and sold 11,500 units during the month
a) What is the company contribution margin ratio ? (Round answer to 3 decimal places
b) What is the company break-even in units ?
c) If sales increase by 140 units, by how much should net operating income increase ?
d) How many units would the company have to sell to attain target profits of $396,900
e) What is the company margin of safety in dollars ?

Explanation / Answer

here sales =$1,644,500 variable expenses =$ $920,000 contribution margin = $ 724,500 Fixed expenses =$ 359,100 net operating income =$ 365,400 units =11,500 unit selling prize =sales/units sold =1,644,500/11,500 =$ 143/unit unit variable prize = total variable cost /units produced =920,000/11,500 = $80 /unit a) contribution margin ratio =total contribution margin/total revenue =724,500/1,644,500 =0.441 (answer) b) let X be the units PX =VX+fixed cost 143*X=80X+359,100 X= 5700 units (answer) c) if sale increases by 140 units operating income =sales -total cost total units =11500+140 =11640 operating income =11640*143-11640*80-359100 =$ 374,220 increase in operating income =374,220-365,400 =$ 8820 (answer) d) let X be the units profit =sales -total cost 396,900 =143X-80X-359,100 X = 12000 units (answer) e) margin of safety =current sales -break-even sales =1,644,500-(break-even units*unit selling prize) =1,644,500-5700*143 =1,644,500-815,100 =$ 829,400 (answer)

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