Answers
Total variable cost:
Selling expense = $210,000 X 40% = $84,000
Direct material = $494,000
Direct labor = $83,000
Administrative expense = $282,000 X 20% = $56,400
Manufacturing overhead = $368,000 X 70% = $257,600
Total variable cost = $84,000 + $494,000 + $83,000 + $56,400 + $257,600 = $975,000
Total Fixed cost:
Selling expense = $210,000 X 60% = $126,000
Administrative expense = $282,000 X 80% = $225,600
Manufacturing overhead = $368,000 X 30% = $110,400
Total Fixed cost = $126,000 + $225,600 + $110,400 = $462,000
(1)
Contribution margin for current year = $1,300,000 - $975,000 = $325,000
Contribution margin for Projected year = ($1,300,000 - $975,000) + 10% = $357,500
(2)
Fixed costs = $462,000
Contribution margin per unit = $325,000 / $130,000 = $2.5
Breakeven point in units = $462,000 / $2.5 = 184,800 units
Breakeven point in dollars = $462,000 X $10 / $2.5 = $1,848,000
Sales dollar required for targeted income = [($462,000 + $212,000) / $2.5] X $10 = $2,696,000
Margin of safety ratio = ($2,696,000 - $1,848,000) / $2,696,000 = 31.5%
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