From the ledger balances below, prepare a trial balance for Cullumber Company at June 30, 2017. All account balances are normal.
1 answer:
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Answer:
(A) 1,200 Margin of Safety_{units}
(B) 330,000 Margin of Safety_{usd}
(C) Margin of Safety 40% of Sales
Explanation:
(A)
275 - 150 = <u>125 CM per unit</u>
3,000 - 1,800 = 1,200 Margin of Safety_{units}
HOW? we Calculate the contribution per unit. Then the BEP in units and with that the margin of safety in units.
(B)
125/275 = 0.45454545 = <u>5/11 CM ratio</u>
225,000/(5/11) = 495,000 BEP USD
825,000-495,000 = 330,000 Margin of Safety_{usd}
HOW? we Calculate the contribution ratio by dividing CM over sales. Then the BEP in dollars and with that the margin of safety in dollars.
<em><u>Important:</u></em> When posible to avoid rounding errors express as fraction iof posible
(C)
Margin of Safety 40%