Question: Need help with 5B-D Assume the company sold only basic shirts (no custom designs) and incurred fixed costs of $1,403 per month. a. Calculate the

Need help with 5B-D

Assume the company sold only basic shirts (no custom designs) and incurred fixed costs of $1,403 per month.

a. Calculate the contribution margin per unit, contribution margin ratio, required sales in units to break even, and required sales in dollars to break even.

b. Determine the margin of safety in units and dollars.

c. Graph Savannah Shirt Company CVP relationships. Show the break even point, the sales in revenue line, the fixed cost line, the total cost line, the operating loss area, and the operating income area.

d. Suppose the Savannah Shirt Company wants to earn an operating income of $4,100 per month. Compute the required sales in units and dollars to achieve this profit goal.


5A
Contribution Margin per unit = Net sales price per unit - variable cost per unit
$8.54 - $6.10 =	$2.44

Contribution margin ratio = CM / Net sales revenue
$2.44 / $8.54 =	28.57%

Breakeven: Required sales in units = (Fixed Costs + Target Profit) / CM
(1,403 + 0) / 2.44 =		575	shirts

Breakeven: Required sales in dollar = Required sales in unit x Sales price per unit
575 shirts x $8.54 =		$4,910.50

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