HUDSON co. Contribution Margin Income Statement For Year Ended December 31, 2017

Question

HUDSON co. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,500 units at $225 each) Variable costs (11,500 units at $180 each) Contribution margin Fixed costs Pretax income $2,587,500 2,070,000 $ 517,500 360,000 $157,500 1. Assume Hudson Co. has a target pretax income of $154,000 for 2018. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target pretax income for 2018, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.) 1. Amount of sales 2. Margin of safety

Explanation / Answer

CM ratio = 517500/2587500= 20% 1 Amount of sales=(360000+154000)/20%= $2570000 2 Break even sales=360000/20%= $1800000 Margin of safety%=(2570000-1800000)/2570000= 30.0%

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