Refer to the information in Exercise. In Exercise HUDSON CO. Contribution Margin Income Statement For Year Ended

Question:

Refer to the information in Exercise.

In Exercise

HUDSON CO.

Contribution Margin Income Statement

For Year Ended December 31, 2015

Sales (9,600 units at $225 each) . . . . . . . . . . . . . . . . $2,160,000

Variable costs (9,600 units at $180 each) . . . . . . . . . 1,728,000

Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . $ 432,000

Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,000

Pretax income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,000

1. Assume Hudson Co. has a target pretax income of $162,000 for 2016. What amount of sales (in dollars) is needed to produce this target income?

2. If Hudson achieves its target pretax income for 2016, what is its margin of safety (in percent)? (Round to one decimal place.)

Contribution Margin
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...