Exercise 9-26

CVP; margin of safetyFarmer Ned wants to cash in on the increased demand for ethanol. Accordingly, he purchased a corn farm in Iowa. Ned believes his corn crop can be sold to an ethanol plant for $9.60 per bushel. Variable cost associated with growing and selling a bushel of corn is $7.60. Ned's annual fixed cost is $264,000.

Use the contribution margin ratio to calculate break even point sales.

a. What is the break-even point in sales dollars?

$

What is the break-even point in bushels of corn?

bushels

If Ned's farm is 1,200 acres, how many bushels must he produce per acre to break even?

bushels per acre

b.If Ned actually produces 174,000 bushels, what is the margin of safety in bushels?

bushels

If Ned actually produces 174,000 bushels, what is the margin of safety in dollars?

$

If Ned actually produces 174,000 bushels, what is the margin of safety as a percentage? Round your answer to two decimal places.

%