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9 Calculating break-even point, contribution margin ratio, and margin of safety ratio Plaid Enterprises Inc. is considering building a manufacturing plant in Scotland. Predicting sales
9 Calculating break-even point, contribution margin ratio, and margin of safety ratio Plaid Enterprises Inc. is considering building a manufacturing plant in Scotland. Predicting sales of 100,000 units, Plaid estimates the following expenses: Percent of Total Annual Expenses That Are Fixed 10% 20% 40% 60% Total Annual Expenses $19,000 26,000 40,000 14,000 $99,000 Materials Labor Overhead Marketing and administration A Scottish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 15% of the sales price. None of the U.S. home office expense will be allocated to the Scottish facility. Required: 1. If the unit sales price is $2, how many units must be sold to break even? (Hint: First compute the variable cost per unit.) 2. Calculate the margin of safety ratio. 3. Calculate the contribution margin ratio
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