Glacial Company estimates that variable costs will be 62.5% of sales, and fixed

Question

Glacial Company estimates that variable costs will be 62.5% of sales, and fixed costs will total $600,000. The selling price of the product is $4.
Glacial Company estimates that variable costs will be 62.5% of sales, and fixed costs will total $600,000. The selling price of the product is $4.
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Glacial Company estimates that variable costs will be 62.5% of sales, and fixed costs will total Compute the break-even point in (1) units and (2) dollars.

Explanation / Answer

Compute the break-even point in (1) units and (2) dollars. (Round intermediate calculations to 2 decimal places, e.g. $8.75 or .48 Round final answers to 0 decimal places, e.g. 485,000.)

1. Break even in units:

Contribution margin per unit = 4*(1-.625)= 1.50

Break even in units= 600,000/1.50 = 400,000 units (answer)

2. break even in dollars = 400,000 units*$4 per unit = $1,600,000 (answer)

Compute the margin of safety in (1) dollars and (2) as a ratio, assuming actual sales of $2,000,000. (Round the Margin of Safety ratio to 0 decimal places, e.g. 27%.)

1. Margin of safety in dollars: 2,000,000

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