5. Therefore, total contribution margin for June must have been:
5 × $27,000 = $135,000.
June’s income statement can now be completed by simply inserting
known data and computing unknown data:
PYRRHIC COMPANY
Actual Income Statement
For the Month Ended June 30
Total Per Unit Percent
Sales (30,000 units)... $225,000 $7.50 100
Less variable expenses.... 90,000 * 3.00 * 40 *
Contribution margin... 135,000 $4.50 60 *
Less fixed expenses... 108,000 *
Net operating income ... $ 27,000
*Computed by working from known data.
b. The break-even point:
Fixed expenses
Break-even point= in unit sales Unit contribution margin
$108,000
= = 24,000
$4.50 per unit
In dollars: 24,000 units × $7.50 per unit = $180,000
c. Margin of safety in dollars=Total sales - Break-even sales
=$225,000 - $180,000 = $45,000
Margin of safety in dollars
Margin of safety= percentage Total sales
$45,000
Case 6-32 (continued)
d. The degree of operating leverage:
Contribution margin $135,000 = = 5
Net income $27,000
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