Exercise 18-17 (Part Level Submission) Felde Bucket Co., a manufacturer of rain

Question

Exercise 18-17 (Part Level Submission) Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2016 Sales Sales price Variable costs Fixed costs 2,000 units $35.00 per unit $12.25 per unit $16,000 ?(a) Your answer is correct What is the contribution margin ratio? (Round answer to 0 decimal places, e.g. 5,275.) Contribution margin ratio Click if you would like to Show Work for this question: Open Show Work 651 % SHOW SOLUTION LINK TO TEXT VIDEO: APPLIED SKILLS Attempts: 1 of 7 used ? (b) [y] Your answer is correct What is the break-even point in dollars? (Round intermediate calculation and final answers to 0 decimal places, e.g. 5,275.) Break-even point Click if you would like to Show Work for this question: Open Show Work 24615 SHOW SOLUTION LINK TO TEXT VIDEO: APPLIED SKILLS

Explanation / Answer

Solution a:

Contribution Margin Ratio = (Sales price - variable cost)/ Sale prive = ($35 -$12.25) / $35 = 65%

Solution b:

Break even point in dollars = Fixed Cost / Contribution ratio = 16000 / 65% = $24,615

Solution c:

Margin of safety = Actual Sales - Break even sales = (2000*$35) - $24615 = $45,385

Margin of safety Ratio =Margin of safety / Actual sales = $45385 / $70000 = 64.84%

Solution d:

Dollar contribution margin at present = units * (sale price - Variabe cost) = 2000*($35 - $12.25) = $45,500

Increase in contribution margin = $45500 *30% = $13,650

Total Increase in sale units required = Increase in contribution / contribution per unit = $13,650 / ($35 -$12.25) = 600 units

Total increase in sales required = 600 units* $35 = $21,000

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