4. (15 pts) The Marstall Company. has provided the following budget information
ID: 2524641 • Letter: 4
Question
4. (15 pts) The Marstall Company. has provided the following budget information for 2011: Month Sales in Units April May June 24,000 25,000 29,000 31,000 27,000 24,000 Production in Units wo pounds of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production. It is projected that at the beginning of April, there ill be 16,000 pounds of material on hand. Required: Prepare a detailed schedule showing the pounds of material to be purchased in Mav. (20 pts) The de la Fuente Company manufactures and sells windows. Currently, 60,000 windows are sold per year at a price of $60.00 each. Fixed costs are $900,000 per year and variable costs are $20.00 per window. 5. What is the current operating income? What is the current breakeven point in units? What is the current breakeven in Dollars? What is the Margin of Safety in units and dollars?Explanation / Answer
Current Operating Income
Sales (60000 x $60) $36,00,000
Less: Variable cost (60000x20) $12,00,000
Contribution $24,00,000
Less : Fixed Costs $9,00,000
Current Operating Income $15,00,000
Current break-even point in units.
Break-even point in units = Fixed Costs / Contribution per unit
= $9,00,000/ ($60 - $20)
= $9,00,000/ $40
= 22,500 Units
Current break-even point in Dollars
Contribution ratio = ($40/$60)*100 = 0.66667 or 67%
Break-even point in dollars = Fixed Costs / Contribution Margin ratio
= $9,00,000/ 0.6667
= $13,50,000
Margin of safety in Units
Margin of safety in units = Actual Sales units – Break-Even sales units
= 60,000 – 22,500
= 37,500 Units
Margin of safety in Dollars
Margin of safety in Dollars = Actual Sales – Break-Even sales
= $36,00,000 - $13,50,000
= $22,50,000
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