1. The following is Arkadia Corporation's contribution format income statement for last month: Sales $1,200,000 Less variable expenses 800,000 Contribution margin 400,000 Less fixed expenses 300,000 Net income $100,000 The company has no beginning or ending inventories and produced and sold 20,000 units during the month. Required: a. What is the company's contribution margin ratio? b. What is the company's break-even in units? c. If sales increase by 100 units, by how much should net income increase? d. How many units would the company have to sell to attain target profits of $125,000? e. What is the company's margin of safety in dollars? 5*2 = 10 2. Foster Company makes 20,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: $25.10 18.20 2.40 Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 13.40 $56.70 An outside supplier has offered to sell the company all of these parts it needs for $56.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $50,000 per year. If the part were purchased from the outside supplier, all of the direct labour cost of the part would be avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. Required: a. How much of the unit product cost of $56.70 is relevant in the decision of whether to make or buy the part? b. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it? c. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 20,000 units required each year? 3*5 = 15