(a) Breakeven Point: The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered. To compute: The breakeven point if the fixed cost is $ 1 , 000 , 000 .

Question

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Answer 1

Question

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

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Answer 2

Question

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

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Answer 3

Question

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

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Answer 4

Question

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

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Answer 5

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

Answer 6

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

Answer 7

Chapter 6, Problem 22E

To determine

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Answer 8

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$1,000,00040%=$2,500,000

Answer 13

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

Answer 14

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To prove:

The breakeven point by using contribution margin statement.

Answer 15

Expert Solution

Answer to Problem 22E

The breakeven point is $2,500,000.

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$2,500,000
Variable Cost per Canoe (B)	($1,500,000)
Contribution Margin (A−B)	$1,000,000
Less: Fixed Cost	$1,000,000
Profit	−

Answer 20

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

Answer 21

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Answer 22

Expert Solution

Answer to Problem 22E

The target sale point is $4,500,000.

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Fixed cost is $1,000,000

Contribution margin is 40%(1−60%)

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$1,000,000+$800,00040%=$4,500,000

Answer 27

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

Answer 28

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Answer 29

Expert Solution

Answer to Problem 22E

The target sale is $4,500,000.

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Income Statement:

Particulars	Amount
Sales Price (A)	$4,500,000
Variable Cost per Canoe (B)	($2,700,000)
Contribution Margin (A−B)	$1,800,000
Less: Fixed Cost	$1,000,000
Profit	$800,000

Answer 34

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

Answer 35

To determine

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Answer 36

Expert Solution

Answer to Problem 22E

The margin safety is $2,000,000 and percentage of sales is 44.44%.

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

The actual sales amount to $4,500,000

The breakeven sales amount to $2,500,000

The margin of safety in terms of amount is calculated as:

Margin of Safety=Actual Sales−Breakeven Sales=$4,500,000−$2,500,000=$2,000,000

The margin of safety in terms of percentage of sales is calculated as:

Margin of Safety=Actual Sales−Breakeven SalesActual Sales=$4,500,000−$2,500,000$4,500,000=44.44%

Answer 41

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(a) Breakeven Point: The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered. To compute: The breakeven point if the fixed cost is $ 1 , 000 , 000 .

Concept explainers

Videos

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

Answer to Problem 22E

Explanation of Solution

Answer to Problem 22E

Explanation of Solution

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

Answer to Problem 22E

Explanation of Solution

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

Answer to Problem 22E

Explanation of Solution

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.

Answer to Problem 22E

Explanation of Solution

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Chapter 6 Solutions

(a) Breakeven Point: The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered. To compute: The breakeven point if the fixed cost is $ 1 , 000 , 000 .

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(a) Breakeven Point: The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered. To compute: The breakeven point if the fixed cost is $1,000,000.

Answer to Problem 22E

Explanation of Solution

(b) Concept introduction: Breakeven Point: The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered. To prove: The breakeven point by using contribution margin statement.

Answer to Problem 22E

Explanation of Solution

(c) Concept introduction: Target Profit: The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved. The total sales to achieve target profit of $800,000.

Answer to Problem 22E

Explanation of Solution

(d) Concept introduction: Target Profit: The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved. To prove: The target sale by using contribution margin statement.

Answer to Problem 22E

Explanation of Solution

(e) Concept introduction: Margin of Safety: The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales. To compute: The margin safety in units and percentage of sales.

Answer to Problem 22E

Explanation of Solution

Want to see more full solutions like this?

Chapter 6 Solutions

(a)

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $1,000,000.

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $800,000.

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

To prove:

The target sale by using contribution margin statement.

(e)

Concept introduction:

Margin of Safety:

The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.

To compute:

The margin safety in units and percentage of sales.