BREAK-EVEN UNITS, CONTRIBUTION MARGIN RATIO, MULTIPLE-PRODUCT BREAK EVEN, MARGIN OF SAFETY, DEGREE OF OPERATING LEVERAGE Rad-Brad, Inc.’s projected operating income (based on sales of 350,000 units) for the coming year is as follows:

Total Sales $8,400,000 Less: Variable expenses 6,720,000 Contribution margin $1,680,000 Less: Fixed expenses 1,512,000 Operating income $ 168,000 Required:

. Compute:

a. Variable cost per unit

b. Contribution margin per unit

c. Contribution margin ratio

d. Break-even point in units.

e. Break-even point in sales dollars.

. How many units must be sold to earn operating income of $300,000?

. Compute the additional operating income that Rad-Brad’s would earn if sales were

$50,000 more than expected.

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

. Compute the degree of operating leverage.

. Compute the new operating income if sales are 10 percent higher than expected.

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