1. Please show all work and number each answer accordingly.

2. Round all answers to two decimal places.

Part I Use CVP to Plan Profits

Nottingham News Company has the right to sell and deliver the city newspaper in a designated area in the country. A monthly subscription sells for $30.00, and Nottingham News pays $10.00 per month for each newspaper subscription. In addition to this variable cost, Nottingham News has fixed costs of $3,000 per month. Nottingham New's currently activity level is 700 subscriptions.

Required:

1. Calculate the contribution margin ratio and explain the ratio as it pertains to Nottingham News Company.

2. Use the mathematical formula to calculate Nottingham News monthly breakeven point in units (number of subscriptions).

3. Use the shortcut contribution margin approach to calculate Nottingham News monthly breakeven in units (number of subscriptions).

4. Prove the breakeven point by preparing a contribution margin income statement.

5. Use the contribution margin ratio, which you calculated in number one, to compute Nottingham News breakeven point in sales dollars.

6. Calculate the margin of safety ratio and explain the ratio as it pertains to Nottingham News Company.

7. The owner of Nottingham News wants to earn a $10,000 profit per month. Calculate the sales volume in units (number of subscriptions) and sales dollars required to achieve this level of profit.