Managerial Acct Chapter 5
Margin of safety in dollars
Total budgeted (or actual) sales − Break-even sales
Total contribution margin equals
fixed expenses plus net operating income
Profit
(Contribution margin ratio × Sales) − Fixed expenses
Unit sales to attain a target profit
(Target profit + Fixed expenses) ÷ Unit contribution margin
Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was
53% ($100,170/189,00)
Company A has fixed costs of $564,000 and has set a target profit of $800,000. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals
564,000 + 800,000 / 0.62 =
Company A's product sells for $90 and has a variable cost of $35 per unit. Fixed costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is
90 - 35 = 55
Budgeted sales are $982,000, break-even sales are $932,200, and fixed expenses are $429,000. The company's budgeted margin of safety in dollars is
982,000 - 932,200 = 49,800
Contribution margin ratio
Contribution margin ÷ Sales
Dollar sales to break even
Fixed expenses ÷ Contribution margin ratio
Margin of safety percentage
Margin of safety in dollars ÷ Total budgeted (or actual) sales
Which of the following items are found above the contribution margin on a contribution margin format income statement?
Sales Variable expenses
Selling price per unit
Sales ÷ Quantity sold
Contribution margin
Sales − Variable expenses
Unit contribution margin
Selling price per unit − Variable expenses per unit
Total Contribution Margin
Unit contribution margin × Quantity sold
Variable expenses per unit
Variable expenses ÷ Quantity sold