The Cornish Corporation Has Budgeted Fixed Costs of $125,000 and an Estimated

question 101

Essay

The Cornish Corporation has budgeted fixed costs of $125,000 and an estimated selling price of $16.50 per unit. The contribution margin ratio is 40% and the company plans to sell 25,000 units in 2021.
Required:
(a) Compute the break-even point in dollars.
(b) Compute the margin of safety for 2021.
(c) Compute the expected operating profit for 2021.

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Definitions:

Consignee

The person or company that receives goods for sale, storage, or shipment on behalf of another, holding goods without taking ownership.

FOB Destination

A shipping term where the seller is responsible for the delivery of goods to a specific destination, absorbing all costs and risks until the goods are received by the buyer.

Perpetual Inventory System

A method of inventory management where updates to inventory records are made continuously as transactions occur.

Net Price Method

An accounting method where discounts are not recorded in the accounting records; instead, purchases are recorded at the net purchase price.