Mabo Company makes calculators that sell for $20 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $9 per unit.
(a)Compute break-even point in units using the mathematical equation.
(b)Compute break-even point in dollars using the contribution margin (CM) ratio.
(c)Compute the margin of safety percentage assuming actual sales are $500,000.
(d)Compute the sales required in dollars to earn net income of $165,000.
Know the formulas.
Recognize that variable costs change with sales volume; fixed costs do not.
Avoid computational errors.