equation and (b) unit contribution margin.
Brief Exercise 18-10
For Flynn Company, variable costs are 68% of sales, and fixed
costs are $188,000. Management’s net income goal is $32,000.
Compute the required sales in dollars needed to achieve
management’s target net income of $32,000. (Use the contribution
margin approach.)
Brief Exercise 18-11
For Astoria Company, actual sales are $11,131,000, and breakeven sales are $7,946,000.
Compute the margin of safety in dollars.
Compute the margin of safety ratio.
Expand Your Critical Thinking 18-1
Creative Ideas Company has decided to introduce a new product.
The new product can be manufactured by either a capitalintensive method or a labor-intensive method. The manufacturing
method will not affect the quality of the product. The estimated
manufacturing costs by the two methods are as follows.
Creative Ideas’ market research department has recommended
an introductory unit sales price of $36. The incremental selling
expenses are estimated to be $562,000 annually plus $2 for each
unit sold, regardless of manufacturing method.