Breakeven point & Margin of safety



  Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and fixed expenses were $45,000.





Estimate the change in the company’s net operating income if it were to increase its total sales by $1,500.


What is the company’s contribution margin (CM) ratio?




2.      [The following information applies to the questions displayed below.]

Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.Required:a.Compute for the company’s break-even point in unit sales using the equation method.b. Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.) CM ratio______________________ Break-even point in dollar sales________________________________    



4.     Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning next month’s budget appear below:



 per unit

  Selling price


 per unit

  Variable expenses


  Fixed expenses


 per month

  Unit sales


 units per month




Compute the company’s margin of safety.

b. Compute the company’s margin of safety as a percentage of its sales. (%)


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