Preston Company manufactures and sells a single product. The company's sales and expenses for last year follow:
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Requirements
1. Fill in the missing numbers in the preceding table. Use the table to answer the following questions:
a. What is the total contribution margin?
b. What is the per unit contribution margin?
c. What is the operating income?
d. How many units were sold?
2. Answer the following questions about breakeven analysis:
a. What is the breakeven point in units?
b. What is the breakeven point in sales dollars?
3. Answer the following questions about target profit analysis and safety margin:
a. How many units must the company sell in order to earn a profit of $55,000?
b. What is the margin of safety in units?
c. What is the margin of safety in sales dollars?
d. What is the margin of safety in percentage?
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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