05 answer b selling price variable costs contribution

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Unformatted text preview: answer b Selling price Variable Costs Contribution margin Units sold Total contribution margin R50.00 15.00 35.00 x 3,600 R126,000 70% Contribution margin is firstly a contribution to fixed costs and once you have reached break-even it is a contribution to profits. The contribution above will cover fixed costs R40,530 so any additional contribution will be profits. Increase in contribution = = = Current contribution x 40% (increased margin) R126,000 x 40% R50,400 Additional sales = = Additional CM / CM Margin ratio R50,400 / 0.70 = R72,000 Compiled by Colin C Smith 2013 Page 1 of 2 COST-VOLUME-PROFIT-ANALYSIS MCQ SOLUTIONS CVP.06 – answer b Margin of safety = Sales – Break even sales The answer is expressed in units so: Break-even units = = = Fixed costs / contribution margin R40,530 / R35 1,158 units Margin of safety required Expressed in units = = = R40,000 R40,000 / R50 selling price 800 units Required sales units = = BE sales + Safety sales 1,158 units + 800units 1,958 units Break-even units = = = Fixed costs / contribution margin R40,530 x 0.80 / R35 926 units Dec...
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This document was uploaded on 04/05/2014.

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