Divine DVDs Pty Ltd manufactures and sells DVDS. Price and cost data are in the following table.

(In the following requirements, ignore income taxes.)
Required
1. What is Divine DVDs' break-even point in units?
2. What is the company's break-even point in sales dollars?
3. How many units would Divine DVDs have to sell in order to earn a profit of $390 000?
4. What is the firm's safety margin?
5. Management estimate that direct labour costs will increase by 10 percent next year. How many units will the company have to sell next year to reach its break-even point?
6. If Divine DVDs' direct labour costs do increase by 10 percent, what selling price per unit of product must it charge to maintain the same contribution margin ratio?
(CMA, adapted)

Transcribed Image Text:

Selling price per unit Variable costs per unit: 25.00 Direct material $4 8.20 Direct labour 4.00 Manufacturing overhead 6.00 Selling costs Total variable costs per unit 1.60 19.80 $4 Annual fixed costs: Manufacturing overhead $ 288 000 Selling and administrative 414 000 Total fixed costs $ 702 000 Forecast annual sales (140 000 units) $3 500 000 %24