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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 marginratio. (Round your answers to two decimal places.)

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

Short Answer

Expert verified

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 by step solution

01

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)

02

Calculation of breakeven sales in dollars and units

Breakevensalesinunits=FixedcostContributionmarginperunit=$91,080+$0$0.99=92,000PackageBreakevensalesindollars=FixedcostContributionmarginratio=$91,08055%%=$165,600Package

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Most popular questions from this chapter

What is the margin of safety? What are the three ways it can be expressed?

Question: Why is the calculation to determine the target profit considered a variation of the breakeven calculation?

What is target profit?

Use the following information to complete Short Exercises S20-16 and S20-17.

Wild Waters Swim Park sells individual and family tickets. With a ticket, each person receives a meal, three beverages, and unlimited use of the swimming pools. Wild Waters has the following ticket prices and variable costs for 2018:

Individual Family Sales price per ticket \( 50 \) 150 Variable cost per ticket 35 140

Wild Waters expects to sell one individual ticket for every four family tickets. Wild Watersโ€™s total fixed costs are $27,500.

S20-16 Calculating breakeven point for two products

Using the Wild Waters Swim Park information presented, do the following tasks.

Requirements

1. Compute the weighted-average contribution margin per ticket.

2. Calculate the total number of tickets Wild Waters must sell to break even.

3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.

Use the following information to complete Short Exercises S20-16 and S20-17.

Wild Waters Swim Park sells individual and family tickets. With a ticket, each person receives a meal, three beverages, and unlimited use of the swimming pools. Wild Waters has the following ticket prices and variable costs for 2018:

Individual Family Sales price per ticket \( 50 \) 150 Variable cost per ticket 35 140

Wild Waters expects to sell one individual ticket for every four family tickets. Wild Watersโ€™s total fixed costs are $27,500.

S20-17 Calculating breakeven point for two products

For 2019, Wild Waters expects a sales mix of four individual tickets for every one family ticket.

Requirements

1. Compute the new weighted-average contribution margin per ticket.

2. Calculate the total number of tickets Wild Waters must sell to break even.

3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.

See all solutions

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