Iron Decor manufactures decorative iron railings. In preparing for next year\'s

Question

Iron Decor manufactures decorative iron railings. In preparing for next year's operations, management has developed the following estimates: Required: Compute the following items: Unit contribution margin. Contribution margin ratio. Break-even in dollar sales. Margin of safety percentage. If the sales volume increases by 20% with no change in total fixed expenses, what will be the change in net operating income? If the per unit variable production costs increase by 15%: and if fixed selling and administrative expenses increase by 12%, what will be the new break-even point in dollar sales?

Explanation / Answer

a unit cotribution margin = sales price per unit - total variable cost per unit

unit cotribution margin= 50 - (3.5+5) = 41.5

b cotribution margin ratio = contribution margin per unit / sales price per unit

cotribution margin ratio= 41.5 / 50 = 0.83

c break even in dollar sales = total fixed expenses / contribution margin ratio

break even in dollar sales = (30000+80000) / 0.83 = 132530.12

d margin of safety percentage = (actual sales - break even point) / actual sales

margin of safety percentage = (1000000-132530) / 1000000 =0.87 is 87%

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.