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What is its margin of safety ratio

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Question - Viejol Corporation has collected the following information after its first year of sales. Sales were $1,440,000 on 120,000 units, selling expenses $210,000 (40% variable and 60% fixed), direct materials $504,000, direct labor $169,400, administrative expenses $276,000 (20% variable and 80% fixed), and manufacturing overhead $382,000 (70% variable and 30% fixed). Top management has asked you for a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.

Contribution margin for current year 360000

Contribution margin for projected year 396000

Fixed Costs 461400

Break-even point in units 153800 units

Break-even point in dollars $1845600

Sales dollars required for target net income $2709600

If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?

Reference no: EM132747095

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