BREAK-EVEN UNITS, CONTRIBUTION MARGIN RATIO, MARGIN OF SAFETY Bandaleria Company’s projected profit for the coming year is as follows:

Total Per Unit Sales $2,480,000 $20 Less: Variable expenses 1,488,000 12 Contribution margin $ 992,000 $ 8 Less: Fixed expenses 716,800 Operating income $ 275,200 Required:

. Compute the break-even point in units.

. How many units must be sold to earn a profit of $640,000?

. Compute the contribution margin ratio. Using that ratio, compute the additional profit that Bandaleria would earn if sales were $50,000 more than expected.

. For the projected level of sales, compute the margin of safety in units.

Problem