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3 years ago

Required information

Business

1 answer:

Paladinen [302]3 years ago

6 0

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)

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