Zootsuit Inc. makes travel bags that sell for P56 each.

For the coming year, management expects

variable costs to be P42 per unit. Compute the following:
a)break-even point in dollars using the contribution margin (CM) ratio;
b)the margin of safety and margin of safety ratio assuming actual sales are P1,382,400; and
c)the sales dollars required to earn net income of P410,000.

Fixed Costs 320,000.00 Margin of safety

Contribution Margin ratio Margin of safety ratio
Selling Price 56
VC per unit 42 14
Selling Price 56 0.25
Break-Even Sales Dollars 1,280,000.00
Total Fixed Costs 320,000.00
Total Variable Costs 960,000.00
VC per unit 42
Break-Even point in units 22,857
ear, management expects fixed costs to total P320,000 and

are P1,382,400; and

102,400.00 Break-even Sales 1,280,000.00

0.07 Net Income 410,000.00
Actual sales dollars 1,690,000.00