During the current year, Vanguard Company sold 80,000 of its only product at a selling price of $60 per unit. Variable costs were $18 per unit, and Vanguard's margin of safety for the year was 25,000 units.Required:1) Calculate Vanguard's margin of safety ratio for the current year.2) What was the amount of Vanguard's fixed costs for the current year?
What will be an ideal response?
1) Margin of safety ratio = margin of safety ÷ actual sales
Margin of safety ratio = 25,000 ÷ 80,000 = 0.3125 = 31.25%
2) Vanguard's break-even sales in units were (80,000 - 25,000) = 55,000 units
At the break-even point, total contribution margin = total fixed costs
Total contribution margin at break-even = 55,000 units × $42 contribution margin per unit = $2,310,000 = total fixed costs
You might also like to view...
List the three levels of management in the traditional pyramid. Give an example of a task that a manager at each level might perform.
What will be an ideal response?
Explain the concept of the supply chain
What will be an ideal response?
St. Vincent's, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.ProductPool No.1 (Driver: DLH) Pool No. 2 (Driver: SU) Pool No. 3 (Driver: PC)Beta 1,200 45 2,250 Zeta 2,800 55 750 Pool Cost$160,000 $280,000 $360,000 The overhead cost allocated to Zeta by using activity-based costing procedures would be:
A. $240,000. B. $560,000. C. $356,000. D. $444,000. E. None of the answers is correct.
Which of the following is a disadvantage of supply chain globalization?
A. It restricts companies from availing taxes imposed on imported goods and services. B. It increases labor costs and materials costs for companies. C. It exposes companies to risks associated with geopolitical conflict. D. It leads to stagnation of company technology or knowledge.