Glacial Company estimates that variable costs will be 55.2% of sales, and fixed
ID: 2417319 • Letter: G
Question
Glacial Company estimates that variable costs will be 55.2% of sales, and fixed costs will total $678,000. The selling price of the product is $5.00
Yams Company reports the following operating results for the month of August: sales $390,000 (units 5,000), variable costs $256,000, and fixed costs $91,000. Management is considering the following independent courses of action to increase net income.
Glacial Company estimates that variable costs will be 55.2% of sales, and fixed costs will total $678,000. The selling price of the product is $5.00
Explanation / Answer
Break Even sales ( Units) = Fixed Costs / ( Sales per unit - Variable cost per unit)
Break Even sales ( Units) = 678000 / ( 5 - 5*55.2%) = 302679 Units
Break Even sales Dollar = 302679 * 5 = 1513395
Margin of safety = Total sales - Break even sales = 2246000 - 1513395 = 732605
Margin of safety % = Margin of safety / sales = 732605 / 2246000 = 32.62%
Particulars Original Selling Price up by 14% Reduce Var Cost to 57% Sales 390,000.00 444,600.00 390,000.00 Variable Costs 256,000.00 256,000.00 145,920.00 Contribution 134,000.00 188,600.00 244,080.00 Fixed Costs 91,000.00 91,000.00 91,000.00 Net Income 43,000.00 97,600.00 153,080.00