Compute the answers to each of the following independent situations. a. Orlando Ray sells liquid and spray mouthwash in a
a. Orlando Ray sells liquid and spray mouthwash in a sales mix of 1:2, respectively. The liquid mouthwash has a contribution margin of $10 per unit; the spray’s CM is $5 per unit. Annual fixed cost for the company is $100,000. How many units of spray mouthwash would Orlando Ray sell at the break-even point?
b. Piniella Company has a break-even point of 4,000 units. At BEP, variable cost is $6,400 and fixed cost is $1,600. If one unit over breakeven is sold, what will be the company’s pre-tax income?
c. Montreal Company’s product sells for $10 per bottle. Annual fixed costs are $216,000 and variable cost is 40 percent of selling price. How many units would Montreal Company need to sell to earn a 25 percent pre-tax profit on sales?
d. York Mets Company has a BEP of 2,800 units. The company currently sells 3,200 units at $65 each. What is the company’s margin of safety in units, in sales dollars, and as a percentage?
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Question Posted: July 24, 2012 03:15:34