PROBLEM 6-23
1)
A.
Total
Percentage
Sales
300,000
500,000
800,000
100%
Variable Costs
180,000
100,000
280,000
35%
Contribution Margin
120,000
400,000
520,000
65%
Fixed Costs
475,800
Net Operating Income
44,200
B.
Formula: Fixed Cost / Contribution Margin Ratio
Break Even Point in $ = 475,800 / 65%
732,000
Formula: Actual Sales - Break-Even Sales
Margin of Safety in $= 800,000 - 732,000 = $68,000
Formula: Margin of safety in dollars / Actual Sales
Margin in Safety in %= 68,000 / 800,000 = 8.5%
2)
A.
Total
Percentage
Sales
300,000
500,000
450,000
1,250,000
100%
Variable Costs
180,000
100,000
360,000
640,000
51.2%
Contribution Margin
120,000
400,000
90,000
610,000
48.8%
Fixed Costs
475,800
Net Operating Income
134,200
B.
Formula: Fixed Cost / Contribution Margin Ratio
Break Even Point in $ = 475,800 / 48.8%
975,000
Formula: Actual Sales - Break-Even Sales
Margin of Safety in $= 1,250,000-975,000=275,000
Formula: Margin of safety in dollars / Actual Sales
Margin in Safety in %= 275,000 / 1,250,000 = 22%
3)
Hawaiian
Fantasy
Tahitian
Joy
Hawaiian
Fantasy
Tahitian
Joy
Samoan
Delight