Question

Contribution margin per unit. Number of units that Ender must sell to break even. Sales level in units that Ender must reach to earn a profit of $240,000. Determine the margin of safety in units, sales dollars, and as a percentage.

Answer 1

Answer:

a. $120

b. 5,000 units

c. 7,000 units

Explanation:

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Workings and explanations :

Contribution margin per unit = Sales - Variable Cots

                                                = $200 - $80

                                                = $120

Break even (units) = Fixed Costs ÷ Contribution margin per unit

                               = $600,000 ÷ $120

                               = 5,000 units

Unit Sales to achieve a target profit = (Targeted Profit + Fixed Costs) ÷ Contribution margin per unit

                                                           = ($240,000 + $600,000) ÷ $120

                                                           = 7,000 units

Margin of Safety = Expected sales - Break even Sales

Note : There is no much details about the current sales level

FULL DETAILS OF THE QUESTION IS AS FOLLOWS :

Information concerning a product produced by Ender Company appears here: Sales price per unit $ 200 Variable cost per unit $ 80 Total annual fixed manufacturing and operating costs $ 600,000