ATTACHMENT PREVIEW

1.
Last month when Harrison Creations, Inc., sold 40,000 units, total sales were \$300,000, total
variable expenses were \$240,000, and fixed expenses were \$45,000.
Required:
a
.
What is the company’s contribution margin (CM) ratio?
b
.
Estimate the change in the company’s net operating income if it were to increase its total sales by
\$1,500.
2.
[The following information applies to the questions displayed below.]
Maxson Products distributes a single product, a woven basket whose selling price is \$8 and whose
variable cost is \$6 per unit. The company’s monthly fixed expense is \$5,500.
Required:
a.Compute for the company’s break-even point in unit sales using the equation method.
b. Compute for the company’s break-even point in sales dollars using the equation method and the CM
ratio.
(Do not round intermediate calculations.
Round your CM ratio to 2 decimal places.)
CM ratio______________________
Break-even point in dollar sales________________________________
3. Compute for the company’s break-even point in unit sales using the formula method.
4. Compute for the company’s break-even point in sales dollars using formula method and the CM ratio.
(Do not round intermediate calculations. Round your CM ratio to 2 decimal places.)
CM ratio__________________
Break-even point in dollar sales______________________

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5.
Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning
next month’s budget appear below:
Selling price
\$25 per unit
Variable expenses
\$15 per unit
Fixed expenses
\$8,500 per month
Unit sales
1,000 units per month
Required:
a. Compute the company’s margin of safety.
b.
Compute the company’s margin of safety as a percentage of its sales. (%)