A firm provides the following sales data:Expected unit sales…………5,000Unit variable cost………… $10Unit selling price……………$16Total fixed cost……………$12,000Required:(a) Calculate the break-even point in dollar sales.(b) Calculate the margin of safety in dollar sales.
What will be an ideal response?
(a) Contribution margin ratio = ($16 - 10)/$16 = 37.5%
Break-even point in dollar sales = $12,000/0.375 = $32,000
(b) Margin of safety in dollars = ($5,000 ? $16) - $32,000 = $48,000
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What will be an ideal response?
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