Problem 18-5A (Part Level Submission)

Viejol Corporation has collected the following information after its first year of sales. Sales were $1,250,000on125,000units, selling expenses $250,000(40% variable and 60% fixed), direct materials $492,000, direct labor $27,900, administrative expenses $272,000(20% variable and 80% fixed), and manufacturing overhead $376,000(70% variable and 30% fixed). Top management has asked you to do CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.

If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?(Round answer to 1 decimal place, e.g. 10.5.)

Margin of safety ratio__________%