Gross margin and contribution margin. (R. Lambert, adapted) Operating income for Foreman Fork Inc. for the year 2007 on production and sales of 200,000 units was as follows:

Sales $3,120,000 Cost of goods sold 1,920,000 Gross margin 1,200,000 Marketing and distribution costs 1,380,000 Operating income (loss) $ (180,000)

Foreman’s fixed manufacturing costs were $600,000, and variable marketing and distribu¬

tion costs were $6 per unit.

Required 1. Calculate Foreman’s variable manufacturing costs per unit in 2007.

2. Calculate Foreman’s fixed marketing and distribution costs in 2007.

3. Because Foreman’s gross margin per unit is $6 ($1,200,000 h- 200,000 units), Sam Hogan, Foreman’s president, believes that if Foreman had produced and sold 230,000 units, it would have covered the $1,380,000 of marketing and distribution costs ($1,380,000 h-

$6 = $230,000) and enabled Foreman to break even for the year. Calculate Foreman’s operating income if production and sales equal 230,000 units. Explain briefly why Sam Hogan is wrong.

4. Calculate the breakeven point for the year 2007 in units and dollars.