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Stellar manufactures and sells swimsuits for $40.00 each. The estimated income statement for 2017 is as...

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Accounting

Stellar manufactures and sells swimsuits for $40.00 each. Theestimated income statement for 2017 is as follows:

Sales: $2,000,000, Variable costs: 1,090,000, contributionmargin: 910,000. Fixed costs: 765,000. Pretax earnings: 145,000

1.Compute the contribution margin per swimsuit and the number ofswimsuits that must be sold to break even. (Roundcontribution margin per swimsuit to 2 decimal places, e.g. 15.25and break even swimsuits to 0 decimal places, e.g.125.)

2.What is the margin of safety in thenumber of swimsuits?
3.Compute the contribution margin ratio and the breakeven point inrevenues. (Round contribution margin ratio to 3 decimalplaces, e.g. 0.256 and breakeven point to 0 decimal places, e.g.125.)

4.What is the margin of safety inrevenues? (Round answer to 0 decimal places, e.g.125.)

5.Suppose next year’s revenue estimateis $200,000 higher. What would be the estimated pretaxearnings?

6.Assume a tax rate of 30%. How many swimsuits must be sold toearn after-tax earnings of $180,000? (Round answer to 0decimal places, e.g. 125.)

Answer & Explanation Solved by verified expert
4.1 Ratings (482 Votes)
Solution 1 Units sold 2000000 40 50000 units Contribution margin per Swimsuit 910000 50000 1820 Swimsuits that must be sold to break even Fixed Costs Contribution margin per unit    See Answer
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