Answer:
Results are below.
Explanation:
Giving the following information:
In June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,320 and variable costs were 40% of sales.
First, we need to calculate the unitary variable cost:
Unitary variable cost= 34*0.4= $13.6
Now, we can determine the contribution margin per unit and the contribution margin ratio:
contribution margin per unit= selling price - unitary variable cost
contribution margin per unit= 34 - 13.6= $20.4
contribution margin ratio= contribution margin per unit/selling price
contribution margin ratio= 20.4/34
contribution margin ratio= 0.6
To calculate the break-even point in units and dollars, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 6,320/20.4
Break-even point in units= 310 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 6,320/0.6
Break-even point (dollars)= $10,533
To calculate the margin of safety, we will use the following formula:
Margin of safety= (current sales level - break-even point)
Margin of safety= 350*34 - 10,533
Margin of safety= $1,367
Finally, the desired profit is $4,000:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (6,320 + 4,000) / 20.4
Break-even point in units= 506 units
Break-even point (dollars)= (fixed costs + desired profit)/ contribution margin ratio
Break-even point (dollars)= 10,320/0.6
Break-even point (dollars)= $17,200
