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1. Margin of safety for 20Y5: - Sales: $98,640,000 - Variable costs: - Cost of goods sold (72% x $44,500,000): $32,040,000 - Selling expenses (75%

  • 1. Margin of safety for 20Y5:
  • - Sales: $98,640,000 - Variable costs: - Cost of goods sold (72% x $44,500,000): $32,040,000 - Selling expenses (75% x $8,000,000): $6,000,000 - Administrative expenses (20% x $3,000,000): $600,000 - Total variable costs: $38,640,000 - Contribution margin (Sales - Variable costs): $98,640,000 - $38,640,000 = $60,000,000 - Fixed costs: - Cost of goods sold (28% x $44,500,000): $12,460,000 - Selling expenses (25% x $8,000,000): $2,000,000 - Administrative expenses (80% x $3,000,000): $2,400,000 - Total fixed costs: $16,860,000 - Operating income: $60,000,000 - $16,860,000 = $43,140,000 - Margin of safety = Contribution margin - Fixed costs = $60,000,000 - $16,860,000 = $43,140,000
  • Margin of safety for 20Y5 = $43,140,000
  • 2. Margin of safety under proposed program assuming 20Y5 sales:
  • - Sales: $98,640,000 (unchanged from 20Y5) - Variable costs: Unchanged - Fixed costs: Increased by $3,600,000 to $16,860,000 + $3,600,000 = $20,460,000 - Contribution margin: Unchanged at $60,000,000 - Margin of safety = Contribution margin - Fixed costs = $60,000,000 - $20,460,000 = $39,540,000 Margin of safety under proposed program = $39,540,000

I need it rounded to the nearest decimal

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