Topper Company produces a variety of glass products. One division makes windshields for compact automobiles. The division's projected income statement for the coming year is as follows:

Required:
1. Compute the contribution margin per unit and calculate the break-even point in units.
Repeat using the contribution margin ratio.
2. The divisional manager has decided to increase the advertising budget by $100,000 and cut the average selling price to $45. These actions will increase sales revenues by $1 million. Will the division be made better off?
3. Suppose sales revenues exceed the estimated amount on the income statement by $540,000. Without preparing a new income statement, determine by how much profits are underestimated.
4. How many units must be sold to earn an after-tax profit of $1,254 million? Assume a tax rate of 34%.
5. Compute the margin of safety in dollars based on the income statement just given.
6. Compute the operating leverage based on the preceding income statement. If sales revenues are 20% greater than expected, what is the percentage increase in profits?

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Sales (150,000 units @ $50) Less: Variable expenses Contribution margin Less: Fixed expenses Operating income $7,500,000 3,450,000 $4,050,000 3,250,000 $ 800,000