Return 6 to question Contribution Margin Income Statement For Year Ended Decembe

Question

Return 6 to question Contribution Margin Income Statement For Year Ended December 31, 2 Sales (9,600 units at $225 each) Variable costs (9,600 units at $180 each) Contribution margin Fixed costs Pretax income $2,160,000 1728,000 $ 432,000 324,000 $ 108,000 2 of 2 1. Assume Hudson Co. has a target pretax income of $162.000 for 2018. What amount of sales (in doliars) 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.) 3 Answer is complete but not entirely correct. 1. Amount of 2. Margin of 33.30 %

Explanation / Answer

1) Contribution margin ratio = (225-180)*100/225 = 20%

Required sales for target income = (324000+162000)/.20 = 2430000

SO Amount of Sales = $2430000

2) Break even sales = 324000/.20 = 1620000

Margin of safety ratio = (2430000-1620000)*100/2430000 = 33.3%

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