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Calculate the margin of safety ratio

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Reference no: EM132840301

Problem - The following information pertains to Fun in the Sun, Inc., a jet ski manufacturer:

Budgeted production costs for the coming year:

Direct materials per ski $575

Direct labor per ski 280

Variable overhead per ski 70

Total fixed overhead 44,850

Budgeted selling and administrative costs for the coming year:

Fixed selling & admin expense $102,000

Sales commission per ski 75

In the coming year, Fun in the Sun plans to produce and sell 710 skis at a price of $1,330 each.

Required -

1. Prepare a CVP income statement.

2. Calculate the breakeven point in units and sales dollars.

3. Calculate the margin of safety.

4. Calculate the margin of safety ratio.

5. If Fun in the Sun wants to earn net income of $165,000, how many units must it sell?

Reference no: EM132840301

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