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Homework answers / question archive / 20X5 actual sales Total manufacturing costs $288,600 230,880 (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs

20X5 actual sales Total manufacturing costs $288,600 230,880 (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs

Accounting

20X5 actual sales Total manufacturing costs $288,600 230,880 (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.) The contribution margin ratio for this product was 35%. 156,000 bars were sold at $1.85 per bar. This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed. The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively

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Solution-

Bars sold = 156,000

Unit Price = $ 1.85

Total Sales (in$) = $288,600

(1) Breakeven sales (in dollars) =

Margin of safety =[Current sales-Breakeven point] / Current Sales

(given)                15% =[$288,600-Breakeven Point]/$288,60

         $ 288,600 X 15% =[$288,600-Breakeven Point]

   $ 43,290 =[$288,600-Breakeven Point]

        Breakeven Point = $245,310

(2) Contribution Margin

   = Sales x Contribution margin (given)

=$288,600 x 35 %

   = $101,010

(3) Variable Cost

    = Sales-contibution

   =$288,600-$101,010

= $ 187,590

(4) Fixed Cost

    = Breakeven sales x Contribution margin

   = $245,310 X 35%

= $85,858.50

Note - Sales figures and others figure like contribution margin and margin of safety are given, using them, the question is answered in layman terms. Your feedback shall be valuable.

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