Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b

Question

4 years ago

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. What is the margin of safety for RBC? c. What sales dollars would be required to achieve an operating profit of $210,000? $520,000?

1 answer:

Rzqust [24] · Answer 1 · 2022-01-20T06:50:14+03:00

a). Breakeven point = Total fixed costs ÷ Contribution margin ratio

Contribution ratio = Contribution margin ÷ Total sales

Contribution ratio = $822,212 ÷ $1,953,000 = 0.421

Breakeven point = $520,000 ÷ 0.421= $1,235,154.

b). Margin of safety = Total Sales - Break-even point

Margin of safety = $1,953,000 – $1,235,154= $717,846.

c) Target profit =(Total fixed costs + Target profit) ÷ Contribution margin ratio

Target profit = ($520,000 + $200,000) ÷ 0.421= $720,000 ÷ 0.421= $1,710,214

Explanation:

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