February Inc. produces durable barbeque covers that sell for $150.00 each.Currently, the company produces and sells 15,000 cover units per year and has the following costs:

Direct materials per unit $50.00

Direct labour per unit $25.00

Variable manufacturing overhead per unit $5.00

Variable selling expenses per unit $2.00

Total fixed manufacturing expenses $200,000

The tax rate for the company is currently 15%

REQUIRED:

a) Compute the unit contribution margin and the contribution margin percentage for February Inc. Round to the next unit. (2 marks)

b) Calculate the break-even point in units. (1 mark)

c) Compute the number of units to be sold to earn an operating income of $90,000. (1 mark)

d) Using the income tax rate provided above, compute the total number of units that must be sold to earn a net income of $85,000. (2 marks)

e) If the firm's total fixed manufacturing costs increased by $15,000 and at the same time the cover's selling price increased by 5%, how many units would the company need to sell to break even?(2 marks). Assume all other costs remains constant.

f) Based on the original data, what is the margin of safety, in units and percent for the year? (2 marks).

g) Based on the original data, calculate the degree of operating leverage. (2 marks)

Answer rating: 100% (QA)

a To compute the unit contribution margin and the contribution margin percentage we need to subtract the variable costs per unit from the selling pric... View the full answer