Answer:
Hudson Co.
1. Amount of sales dollars
= $2,430,000
2. Margin of safety (in percent)
= 33%
3-1) Contribution margin per unit = $45
2) Contribution margin ratio = 20%
3) Break-even point in units = 7,200 units
4) Break-even point in sales dollars = $1,620,000 $255
Explanation:
a) Data and Calculations:
HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2019
Sales (9,600 units at $225 each) $ 2,160,000
Variable costs (9,600 units at $180 each) 1,728,000
Contribution margin 432,000
Fixed costs 324,000
Pretax income $ 108,000
Contribution margin per unit = $45 ($432,000/9,600)
Contribution margin ratio = 20% ($45/$225 * 100)
Break-even point in units = 7,200 ($324,000/$45)
Break-even point in sales dollars = $1,620,000 ($324,000/0.20) $255
1. With target pretax income of $162,000:
Amount of sales dollars = (Fixed cost + Target profit)/Contribution margin ratio
= $2,430,000 ($324,000 + $162,000)/0.20
2. Margin of safety (in percent)
1. Amount of sales = $2,430,000
2. Margin of safety = $810,000 ($2,430,000 - $1,620,000)
Margin of safety in percentage = 33% ($810,000/$2,430,000 * 100)
