
(a)
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.
The breakeven point in units and in sales amount if the selling price is increased to

Answer to Problem 6E
The breakeven point in units is
Explanation of Solution
Contribution Margin Income Statement
Particulars | Amount | |
Sales Price |
||
Variable Cost per Canoe |
||
Contribution Margin |
The break-even point in units is calculated as:
The break-even point in sales is calculated as:
(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.
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 if the sales price is

Answer to Problem 6E
The margin safety in units and percentage of sales is
Explanation of Solution
The actual sales amount to
The breakeven sales amount to
The margin of safety in terms of units is calculated as:
The margin of safety in terms of percentage of sales is calculated as:
(c)
Concept introduction:
Contribution Margin:
The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.
The number of canoes to be sold to achieve target profit of

Answer to Problem 6E
The target sale point in units is
Explanation of Solution
Contribution Margin Income Statement
Particulars | Amount | |
Sales Price |
||
Variable Cost per Canoe |
||
Contribution Margin |
The number units to be sold for achieving the target profit are calculated as:
The sales for achieving the target profit are calculated as:
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