Answer:
1. 6,944 units and $833,333.33
2. $1,080,000 and 22.83%
Explanation:
The computations are shown below:
1. Break-even point in units
= (Fixed expenses ) ÷ (Contribution margin per unit)
where,
Contribution margin per unit = Selling price per unit × contribution margin ratio
= $250,000 ÷ $36
= 6,944 units
Break-even point in sales
= (Fixed expenses ) ÷ (Contribution margin ratio)
= $250,000 ÷ 30%
= $833,333.33
2. For margin of safety and margin of safety ratio:
Margin of safety = Expected sales - break even sales
where,
Expected sales = (Operating income + fixed expense) ÷ (contribution margin ratio)
= ($74,000 + $250,000)
= ($324,000) ÷ (30%)
= $1,080,000
So, the margin of safety would be
= $1,080,000 - $833,333.33
= $246,667
Margin of safety ratio = Margin of safety ÷ total sales
= $246,667 ÷ $1,080,000
= 22.83%
