Fixed Cost Increase and Margin of Safety. Joey Fink, the owner of Kay Manufac- turing...
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Fixed Cost Increase and Margin of Safety. Joey Fink, the owner of Kay Manufac- turing Company, is concerned about increased fixed manufacturing costs. Last year, the fixed manufacturing costs were $600,000. This year, the fixed manufacturing costs increased to $750,000. The fixed selling and administrative costs of $540,000 were the same for both years. The company operated in both years with an average contribution margin ratio of 30%. It earned a profit before income taxes of $910,000 last year 6-12. Questions: What was the sales revenue last year? How much would sales revenue have had to increase this year for the company to have earned the same profit as it did last year? 1. 2. 3. Calculate the margin of safety for each year. Which year was better? 245
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