Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b
. 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:
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:
The Data sheet has been added as an attachment
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