The following is Pacific Limited’s contribution format income statement for January 2022: Sales $1,400,000 Variable expenses 700,000 Contribution margin 700,000 Fixed expenses 400,000 Net operating income $
The following is Pacific Limited’s contribution format income statement for January 2022:
Sales $1,400,000
Variable expenses 700,000
Contribution margin 700,000
Fixed expenses 400,000
Net operating income $ 300,000
The company has no beginning or ending inventories and produced and sold 25,000 units during the month.
Required (show your calculation):
a. The company’s top management team is currently investigating how many units they need to sell to reach the break-even point. Also, they want to know how much revenue they need to generate to reach the break-even point. What do you think?
b. If the company aim to generate a profit of $155,000, how many extra units they need to sell beyond the break-even point?
c. What is the company’s margin of safety both in dollar and percentage terms? Explain the margin of safety of the company?
d.
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