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    Determine Jensen's margin of safety expressed as a percentage

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    1. Jensen Company makes a product that sells for $38 per unit. The company pays $16 per unit for the variable costs of the product and incurs annual fixed costs of $176,000. Jensen expects to sell 21,000 units of product.

    Required:
    Determine Jensen's margin of safety expressed as a percentage.

    Margin of safety %

    Exercise 3-13A Cost-volume-profit relationship [LO 1, 2, 4, 6]

    2. Feskin Corporation is a manufacturing company that makes small electric motors it sells for $36 per unit. The variable costs of production are $22 per motor, and annual fixed costs of production are $196,000.

    Required:
    a. How many units of product must Feskin make and sell to break even?

    Sales volume units

    b. How many units of product must Feskin make and sell to earn a $56,000 profit?

    Sales volume units

    c. The marketing manager believes that sales would increase dramatically if the price were reduced to $34 per unit. How many units of product must Feskin make and sell to earn a $56,000 profit, if the sales price is set at $34 per unit?

    Sales volume units

    Problem 3-23A Comprehensive CVP analysis [LO 2, 4, 6, 7, 8]

    3. Borysko Company makes and sells products with variable costs of $47 each. Borysko incurs annual fixed costs of $22,400. The current sales price is $63.

    Required:
    The following requirements are interdependent. For example, the $4,800 desired profit introduced in Part c also applies to subsequent parts. Likewise, the $55 sales price introduced in Part d applies to the subsequent parts.

    a. Determine the contribution margin per unit.

    Contribution margin per unit $

    b-1. Determine the break-even point in units and in dollars.

    Break-even point in units

    Break-even point in dollars $

    ________________________________________

    b-2. Prepare an income statement using the contribution margin format. (Leave no cells blank - be certain to enter "0" wherever required.

    Borysko Company
    Income Statement

    $

    ________________________________________

    ________________________________________
    Net income $

    ________________________________________________________________________________
    ________________________________________

    c-1.

    Suppose that Borysko desires to earn a $4,800 profit. Determine the sales volume in units and dollars required to earn the desired profit.

    Sales volume in units

    Sales volume in dollars $

    ________________________________________

    c-2. Prepare an income statement using the contribution margin format. (Amounts to be deducted and loss amounts should be indicated with a minus sign.)

    Borysko Company
    Income Statement

    $

    ________________________________________

    ________________________________________

    $

    ________________________________________________________________________________
    ________________________________________

    d-1. If the sales price drops to $55 per unit, what level of sales is required to earn the desired profit? Express your answer in units and dollars.

    Sales volume in units

    Sales volume in dollars $

    ________________________________________

    d-2

    Prepare an income statement using the contribution margin format. (Amounts to be deducted and loss amounts should be indicated with a minus sign. )

    Borysko Company
    Income Statement

    $

    ________________________________________

    ________________________________________

    $

    ________________________________________________________________________________
    ________________________________________

    e-1. If fixed costs drop to $16,800, what level of sales is required to earn the desired profit? Express your answer in units and dollars.

    Sales volume in units

    Sales volume in dollars $

    ________________________________________

    e-2. Prepare an income statement using the contribution margin format. (Amounts to be deducted and loss amounts should be indicated with a minus sign.

    Borysko Company
    Income Statement

    $

    ________________________________________

    ________________________________________

    $

    ________________________________________________________________________________
    ________________________________________

    f-1.

    If variable cost drops to $39 per unit, what level of sales is required to earn the desired profit? Express your answer in units and dollars.

    Sales volume in units

    Sales volume in dollars $

    ________________________________________

    f-2. Prepare an income statement using the contribution margin format. (Amounts to be deducted and loss amounts should be indicated with a minus sign.

    Borysko Company
    Income Statement

    $

    ________________________________________

    ________________________________________

    $

    ________________________________________________________________________________
    ________________________________________

    g. Assume that Borysko concludes that it can sell 1,350 units of product for $55 each. Recall that variable costs are $39 each and fixed costs are $16,800. Compute the margin of safety in units and dollars and as a percentage. (Round your answers to 1 decimal place.)

    Margin of safety in units

    Margin of safety in dollars $

    Margin of safety %

    ________________________________________

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    https://brainmass.com/business/management-accounting/determine-jensens-margin-safety-expressed-percentage-387642

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    Solution Summary

    The expert determines Jensen's margin of safety expressed as a percentages.

    $2.19

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