1) Broom Brothers produces and sells one product. The firm currently sells 10,000 units per year for $90 per unit. Direct material costs are $5 per unit. Direct labor costs are $10 per unit. Variable manufacturing cost are $15 per unit. Fixed manufacturing costs are $150,000. Variable selling costs are $15. Variable administrative costs are $5 per unit. Fixed selling costs are $50,000

a) What is breakeven sales in units? What is breakeven sales in dollars?

b) What is the margin of safety in units? Whats the margin of safety in dollars?

c) What is the degree of operating leverage?

d) If sales increase to 15,000 units per year, profits will increase by ____%.

e) How many units would the firm have to sell to earn profits of $100,000?

f) The firm is considering purchasing a machine to automate its production process, which would reduce variable costs by $20 per unit. At the current sales volume of 10,000 units, what is the maximum the firm should be willing to pay for this machine?