Leprechaun Enterprises Inc., is considering building a manufacturing plant in County Cork. - 13598

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  • Posted on: Fri 31 Aug, 2012
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Calculating break- even point, contribution margin ratio, and margin of safety ratio: Leprechaun Enterprises Inc., is considering building a manufacturing plant in County Cork. Predicting sales of 100,000 units, Leprechaun estimates the following expenses: Total Annual Expenses Percent of Total Annual Expenses That Are Fixed Materials. $ 19,000 10% Labor 26,000 20% Overhead 40,000 40% Marketing and administration. 14,000 60% Total $ 99,000 An Irish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 10% of the sales price. None of the U. S. home office expense will be allocated to the Irish facility. Required: 1. If the unit sales price is $ 2, how many units must be sold to break even? ( Hint: First compute the variable cost per unit.) 2. Calculate the margin of safety ratio. 3. Calculate the contribution margin ratio.

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P10-11 Solution...