(Question and Answer): The Wildhorse Company sells sports decals that can be personalized with a player’s name, a team name, and a jersey numbe

The Wildhorse Company sells sports decals that can be personalized with a player’s name, a team name, and a jersey number for $7.00 each. Wildhorse buys the decals from a supplier for $2.60 each and spends an additional $0.70 in variable operating costs per decal. The results of last month’s operations are as follows:

Sales revenue $14,000
Cost of goods sold 5,200
Gross profit 8,800
Operating expenses 3,100
Operating income $5,700

1. Calculate contribution margin per unit. (Round answer to 2 decimal places, e.g. 0.38.)

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2. What is Wildhorse’s monthly breakeven point in units? In dollars? (Use your answer of breakeven units to calculate the breakeven point in dollars. Round Breakeven units and point in dollar to 0 decimal places, e.g. 25,000.)

3. What is Wildhorse’s margin of safety? (Round answers to 0 decimal places, e.g. 25,000.)

Expert Answer


Sales revenue 7
Less: Variable costs
Cost of goods sold 2.6
Operating expenses 0.7
Contribution margin per unit 3.7
Break even point in units = Fixed costs/ Unit contribution margin = 1700/3.7= 459
Break even point in sales = 459*7= 3213
margin of safety = Actual sales-Break even sales = 14000-3213=

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