Solution-Compute the margin of safety in units and in dollar

Compute the margin of safety in units and in dollar

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Reference no: EM132533646

Suppose that Magik Bicycles wants to produce a new mountain bike called Magik bike III and has forecast the following information.

Price per bike $ 800

Variable cost per bike $ 300

Fixed costs related to bike production $5,500,000

Target profit $ 200,000

Estimated sales 12,000 bikes

Required:

Question i. Find the total contribution margin.

Question ii. Find the breakeven quantity and revenue by using equation method.

Question iii. Find the breakeven quantity and revenue by using contribution margin method.

Question iv. Find the breakeven quantity and revenue by using graphic method.

Question v. Compute the margin of safety in units and in dollar and explain the result.

Question vi. Calculate the degree of operating leverage and explain the result.

Question vii. How many magik bikes should magic bicycles sell to reach target operating income of $200,000?

Question viii. Suppose that Magik Bicycles plans for an after-tax profit of $180,000 and its tax rate is 40%. How many magik bikes should magic bicycles sell to reach the target net income?

Reference no: EM132533646

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Compute the margin of safety in units and in dollar

Reference no: EM132533646

Reference no: EM132533646

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