Homework Answers
a. Contribution Margin ratio = Contribution margin / Sales x
100
= 121000 / $357500 x 100 = 33.85%
b. Break Even in units = Fixed Cost / Contribution Margin per
unit
Contribution Margin per unit = $121000 / 5500 = $22 per unit
Break Even (Units) = $102200 / $22 = 4646 units
c. Net Operating Income will increase by $2200 i.e. 100 x $22
d. Units to attain profit of $25000 = (FIxed cost + Desired
profit) / Contribution Margin per unit
= ($102200 + $25000) / $22 = 5782 units
e. Margin of safety = Actual sales - Break even sales
= $357500 - (4646 x $65) = $55510
f. Degree of Operating leverage = Contribution Margin / Net
Operating Income
= $121000 / $18800 = 6.44
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