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The following information relates to Product Alpha.
Selling price per unit $100
Variable cost per unit $56
Fixed Costs $220,000
Budgeted sales are 7,500 units
Required:
a. As the Cost Accountant, management has asked you to calculate the following:
i. Contribution to sales ratio.
ii. Breakeven point in terms of units sold.
iii. Breakeven point in terms of sales revenue.
iv. Margin of safety (expressed as a percentage of budgeted sales).
b. Explain the significance of each calculation to management.
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