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| Compute break-even point in dollars , contribution margin ratio, target net income sales |
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| Mavericks Inc. produces widgets. The widgets are sold for $1.00 per unit to wholesalers. Unit variable cost are 35%. |
| For the year 2020, management estimates the following revenues and costs. | | |
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| | Sales | $ 2,175,000 | | |
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| | | % of sales | | |
| | Manufacturing overhead- variable | 35% | | |
| | Manufacturing overhead -fixed | 25% | | |
| | SGA expenses - variable | 15% | | |
| | SGA expenses- fixed | 15% | | |
| | Selling expenses - variable | 10% | | |
| | Selling expenses - fixed | 20% | | |
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| Instructions: | | | |
| (a) | Compute the contribution margin ratio. (Round to the nearest full percent.) | |
| (b ) | Compute the break-even point in dollars. | | | |
| (c) | Determine the sales dollars required to earn net income of $350,000. | | |
| (d) | Provide a written Interpretation of the results | | | |
Contribution Margin Ratio
Unit Contribution Margin 0.65
Unit selling Price 1
Contribution Margin Ratio 65%
Break-even point in dollars
Fixed Cost 1,305,000
Contribution Margin Ratio 65%
Break-even point in dollars 2,007,692
Sales Dollars Required
Fixed Costs 1,305,000
Target Income 350,000
Total 1,655,000
Contribution Margin Ratio 65%
Sales dollars required 2,546,154
provide interpretation for the information provide in a few sentences .
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