MidtermPractice_6-16(2)

MidtermPractice_6-16(2) - $216,000 in fixed expenses +...

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Exercise 6-16 Total Per Unit Sales $450,000 $30 Variable Expenses 180,000 12 Contribution Margin 270,000 $18 Fixed Expenses 216,000 Net Operating Income $54,000 Break-even point in units sold: Fixed expenses / Unit CM = 216,000/ $18 = 12,000 Break-even point in total sales dollars: 12,000 units x $30 selling price = $360,000 Total CM at the break- even point: $216,000 (CM needs to be equal to fixed expenses in order to have zero profit.) Units to be sold in order to earn a $90,000 target profit:
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Unformatted text preview: $216,000 in fixed expenses + $90,000 target profit = $306,000 $306,000 / $18 unit CM = 17,000 units Margin of Safety in dollars: Total Current Sales - Break Even Sales = 450,000 - 360,000 = $90,000 Margin of Safety Percentage: Margin of Safety in dollars / Total Sales = $90,000 / $450,000 = 20% CM Ratio: CM / Sales = $270,000 / $450,000 = 60% If sales increase by $50,000, how much would we expect NOI to increase? $50,000 x 60% CM ratio = $30,000...
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