The Budgeted Income Statement For Griffit

Question

The Budgeted Income Statement Presented Below Is For Griffith Corporat The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be (Do not round intermediate calculations): Sales (65,000 units) $1,430,000 Costs: Direct materials $555,000 Direct labor 242,000 Fixed factory overhead 110,000 Variable factory overhead 152,000 Fixed marketing costs 112,000 Variable marketing costs 52,000 1,223,000 Pretax income $207,000

Dr. Jack HW Helper · Accepted Answer

The given problem revolves around financial analysis for Griffith Corporation, specifically calculating the margin of safety in dollars once the company achieves its budgeted sales. This involves understanding the concepts of break-even sales, budgeted sales, and margin of safety, which are fundamental in managerial accounting and financial planning. Margin of safety represents the extent to which sales can drop before the company reaches its break-even point, where total revenues equal total costs, resulting in neither profit nor loss. It is an important indicator of risk, illustrating how much sales can decline before the company becomes unprofitable. The margin of safety in dollars is calculated as the difference between the actual or projected sales and the break-even sales. Given the data, the first step is to determine the company's contribution margin per unit, total contribution margin, and then the fixed costs to identify the break-even sales in dollars. Following this, the margin of safety in dollars can be computed by subtracting break-even sales from projected sales. Step 1: Determine Total Fixed Costs The fixed costs include fixed factory overhead and fixed marketing costs: Fixed factory overhead = $110,000 Fixed marketing costs = $112,000 Total fixed costs = $110,000 + $112,000 = $222,000 Step 2: Determine Total Variable Costs The variable costs are variable factory overhead and variable marketing costs: Variable factory overhead = $152,000 Variable marketing costs = $52,000 Total variable costs = $152,000 + $52,000 = $204,000 Step 3: Calculate Contribution Margin Total sales are $1,430,000 for 65,000 units, implying a sales price per unit: Sales per unit = $1,430,000 / 65,000 = approximately $22 per unit. Total variable costs are $204,000, so the total contribution margin is: Contribution margin = Sales - Total variable costs = $1,430,000 - $204,000 = $1,226,000 Contribution margin per unit = $22 - (Variable costs per unit). To find variable costs per

The Budgeted Income Statement For Griffit

The Budgeted Income Statement Presented Below Is For Griffith Corporat

Paper For Above instruction

Step 1: Determine Total Fixed Costs

Step 2: Determine Total Variable Costs

Step 3: Calculate Contribution Margin

Step 4: Determine Break-Even Sales

Step 5: Calculate Margin of Safety

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