Duncan had revenues of $900,000 in March. Fixed costs in March were $480,000 and profit was $60,000. Answer the following questions:a. What was the contribution margin percentage?b. What monthly sales volume (in dollars) would be needed to break-even?c. What was the margin of safety for March?
What will be an ideal response?
a. 60% = ($480,000 + $60,000)/$900,000
b. $800,000 = $480,000/60%
c. $100,000 = $900,000 - $800,000
Target sales = (Fixed costs + Target profit)/Contribution margin ratio. Break-even sales = Fixed costs/Contribution margin ratio. Margin of safety = Actual sales - Break-even sales
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