Answered: Hobbs Company produces one product for… | bartleby

FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Hobbs Company produces one product for which following is information is available.
Product A
S per unit
Selling price
6.00
Direct Material
2.50
Direct Labor
1.40
Variable overhead
1.10
$ 120,000 per annum
Total Fixed cost
Sales units
200,000 per annum
|Required:
a) Calculate contribution margin per unit.
b) Calculate break even point in units.
c) Calculate break even point in sales value
d) Calculate profit for the year based on total contribution.
e) Calculate Margin of safety in units and percentage of sales.

Expert Solution

Step 1 Introduction

The margin of safety sales are calculated as difference between current sales and break even sales.

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