Exhibit 21-13 Refer to Exhibit 21-13. What dollar amounts go in blanks (R)and (S), respectively?

Question

Exhibit 21-13 ​  Refer to Exhibit 21-13.  What dollar amounts go in blanks (R)and (S), respectively?

Quizplus · Accepted Answer

The total revenue is calculated by multiplying the number of units sold (10,000) by the price per unit ($10.00), which equals $100,000. 
The total variable cost is calculated by multiplying the number of units sold (10,000) by the variable cost per unit ($6.00), which equals $60,000. 
The contribution margin is calculated by subtracting the variable cost per unit ($6.00) from the price per unit ($10.00), which equals $4.00. Therefore, the total contribution margin is calculated by multiplying the contribution margin per unit ($4.00) by the number of units sold (10,000), which equals $40,000.
The total fixed cost is given as $20,000. 
Therefore, the operating income is calculated by subtracting the total variable cost ($60,000) and total fixed cost ($20,000) from the total revenue ($100,000), which equals $20,000. 
To calculate the break-even point, divide the total fixed cost ($20,000) by the contribution margin per unit ($4.00), which equals 5,000 units.
The margin of safety is calculated by subtracting the break-even point (5,000 units) from the actual units sold (10,000 units), which equals 5,000 units. To calculate the margin of safety in dollars, multiply the margin of safety in units (5,000) by the contribution margin per unit ($4.00), which equals $20,000. Therefore, the amounts that go in blanks (R) and (S) are $80 and $30, respectively.

Exhibit 21-13 ​ Refer to Exhibit 21-13

Exhibit 21-13 Refer to Exhibit 21-13