Q27E - Horngren'S Financial And Managerial Accounting

Question

No Slip Co. produces sports socks. The company has fixed costs of \(91,080 and variable costs of \)0.81 per package. Each package sells for $1.80.

Requirements

1. Compute the contribution margin per package and the contribution margin ratio. (Round your answers to two decimal places.)

2. Find the breakeven point in units and in dollars using the contribution margin approach.

Step-by-Step Solution

Answer

Answer

1. Contribution margin ratio is $0.99 and contribution margin ratio is 55%

2. Breakeven sales in units are 92,000 package and $165,600 in dollars.

Step 1: Calculation of contribution margin and contribution margin ratio

                                                                                                                        $

Sales price per unit                                                                                        1.80

Variable cost per unit                                                                                     (0.81)

Contribution margin per unit                                                                         0.99

Contribution margin ratio (sales price per unit/contribution margin           55%

per unit x100)

Step 2: Calculation of breakeven sales in dollars and units

$$\begin{gathered} \mathit{B}\mathit{r}\mathit{e}\mathit{a}\mathit{k}\mathit{e}\mathit{v}\mathit{e}\mathit{n}\mathbf{ }\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{ }\mathit{i}\mathit{n}\mathbf{ }\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathit{s}\mathbf{=}\frac{\mathbf{F}\mathbf{i}\mathbf{x}\mathbf{e}\mathbf{d}\mathbf{ }\mathbf{cos}\mathbf{t}}{\mathbf{C}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{r}\mathbf{i}\mathbf{b}\mathbf{u}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{ }\mathbf{m}\mathbf{a}\mathbf{r}\mathbf{g}\mathbf{i}\mathbf{n}\mathbf{ }\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{ }\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\frac{\mathbf{\$}\mathbf{91}\mathbf{,}\mathbf{080}\mathbf{+}\mathbf{\$}\mathbf{0}}{\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{99}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{92}\mathbf{,}\mathbf{000}\mathbf{ }\mathit{P}\mathit{a}\mathit{c}\mathit{k}\mathit{a}\mathit{g}\mathit{e} \\ \mathit{B}\mathit{r}\mathit{e}\mathit{a}\mathit{k}\mathit{e}\mathit{v}\mathit{e}\mathit{n}\mathbf{ }\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{ }\mathit{i}\mathit{n}\mathbf{ }\mathit{d}\mathit{o}\mathit{l}\mathit{l}\mathit{a}\mathit{r}\mathit{s}\mathbf{=}\frac{\mathbf{Fixed}\mathbf{ }\mathbf{cost}}{\mathbf{Contribution}\mathbf{ }\mathbf{margin}\mathbf{ }\mathbf{r}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\frac{\mathbf{\$}\mathbf{91}\mathbf{,}\mathbf{080}}{\mathbf{55}\mathbf{\%}\mathbf{\%}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{165}\mathbf{,}\mathbf{600}\mathbf{ }\mathit{P}\mathit{a}\mathit{c}\mathit{k}\mathit{a}\mathit{g}\mathit{e} \end{gathered}$$