Calculating break-even point, contribution margin ratio, and margin of safety ratio Lep...

Calculating break-even point, contribution margin ratio, and margin of safety ratio

Leprechaun Enterprises Inc., is considering building a manufacturing plant in County Cork. Predicting sales of 100,000 units, Leprechaun estimates the following expenses:

An Irish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 10% of the sales price. None of the U.S. home office expense will be allocated to the Irish facility.

Required:

1. If the unit sales price is $2, how many units must be sold to break even? (Hint: First compute the variable cost per unit.)

2. Calculate the margin of safety ratio.

3. Calculate the contribution margin ratio.