Smoky Corporation produces barbecues, selling each unit for $900. Current annual production and sales volume is 1,800 barbecues. This is the activity level used by the company to determine its fixed manufacturing overhead rate. The company has a 25% tax rate. Other cost information is as follows:
Direct material cost per unit $ 153
Direct labour cost per unit 100
Variable manufacturing overhead per unit 50
Variable selling expenses per unit 12
Total variable costs per unit 315
Total fixed manufacturing costs $468,000
Required:
1. Compute the contribution margin and CM ratio for the company.
| Contribution margin per unit |
$585 |
| Contribution margin ratio |
65% |
2. Compute the break-even point in units and in sales dollars for the company.
| Break-even point in unit |
$585 |
| Break-even point in sales dollars |
65% |
3. Compute Smoky's margin of safety in units and in dollars.
| margin of safety in units |
1000 |
| margin of safety in dollars |
$900,000 |