HUDSON CO Contribution Margin Income Statement For Year Ended December 31, 2017
ID: 2593046 • Letter: H
Question
HUDSON CO Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (10,100 units at $300 each) $3,030,000 Variable costs (10,100 units at $240 each) _2,424,000 Contribution margin Fixed costs Pretax income $ 606,000 468, 000 $ 138,000 Exercise 18-17 Target income and margin of safety (in dollars) LO C2 1. Assume Hudson Co. has a target pretax income of $167,000 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 26.31%Explanation / Answer
Computation of Contribution Margin Ratio
Contribution Margin
606000
Sales
3030000
Contribution Margin Ratio (606000/3030000)
20%
Particulars
Amount
Target Pretax Income
167000
Add: Fixed Costs
468000
Contribution Margin
635000
Contribution Margin Ratio
20%
Sales in Dollars (635000/20%)
3175000
Computation of Break Even Sales
Fixed Costs
468000
Contribution Margin Ratio
20%
Break Even Sales (468000/20%)
2340000
Computation of Margin of Safety
Actual Sales
3175000
Break Even Sales
2340000
Margin of Safety (3175000 - 2340000)
835000
Margin of Safety in Percent (835000/3175000)*100
26.30%
Computation of Contribution Margin Ratio
Contribution Margin
606000
Sales
3030000
Contribution Margin Ratio (606000/3030000)
20%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.