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Tibeb hand tools manufacturing company manufactures and sells hand tools. The summary of the company’s income statement for December, year 9 is given below

  1. Tibeb hand tools manufacturing company manufactures and sells hand tools. The summary of the company’s income statement for December, year 9 is given below:

                                                                                                                                        Total                                                                             per unit

Sales                                                                                                                       $1,200,000                                                                              $ 80

Less: Variable costs & expenses                                                                        $ 840,000                                                                                $ 56

Contribution margin                                                                                            $ 360,000                                                                                $24

Less fixed costs                                                                                                     $300,000

      Net Income                                                                                                     $60,000

Instruction: Answer the following questions

  1. What is the monthly break-even point in units?
  2. What is the total contribution margin at break-even point?
  3. How many units would have to be sold each month to earn a minimum target income before tax of $54,000?
  4. Compute the margin of safety of the company for the month of December in $ and in percentage
  5. What is the company’s contribution margin ratio?

Feb 06 2020 View more View Less

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