Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to...

income statement

sales (8,680 * 420)		3,645,600
cost of goods sold :
material (30 * 8680 )	260,400
labor (20 *8680 )	173,600
fixed overhead	1,199,900
variable o/h (15*8680)	130,200
cost of goods sold		1,764,100
gross margin		1,881,500
selling expenses
fixed ;
sales salary and commission	249,400
advertising	84,400
travel	18,700
miscellaneous	20,600
variable ;
sales salary and commission (7 * 8680)	60,760
miscellaneous (6*8680)	52,080
total selling expenses		485,940
administrative expenses
fixed ;
office and officer salary	243,700
suppliers	30,000
miscellaneous administrative expenses	28,180
variable ;
suppliers ( 8680 * 3 )	26,040
miscellaneous administrative expenses ( 8680 * 3 )	26040
total administrative expenses		353,960
operating income		1,041,600

2) contribution margin ratio ( 80% )

contribution / selling price

contribution means ( selling price - variable cost )

total variable cost = 84 (given the question )

selling price = 420

contribution = 420 - 84 = 336

contribution margin ratio = (336 / 420 ) * 100 = 80%

3) break even point in unit = fixed cost / contribution

fixed cost = 1,874,880 ( given the question )

break even point in unit = 1,874,880 / 336

  break even point in unit = 5580

break even point in dollar = fixed cost / contribution margin ratio

1,874,880 / 80% = $2,343,600

4) margin of safety percentage

formula = current sales level - break even point / current sales level * 100

= ( 8680 - 5580 / 8680 )100

= 36%

margin of safety dollar = current sales - break even sales

current sales = 3,645,600

break even sales = 2,343,600

= $1,302,000