A. Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed automation follows:

	Before Automation			After Automation
Sales revenue	$	198,000		$	198,000
Less: Variable cost		93,000			57,000
Contribution margin	$	105,000		$	141,000
Less: Fixed cost		20,000			57,000
Net operating income	$	85,000		$	84,000

Required: Compute Lobster Traps degree of operating leverage before and after automation. (Round your answers to 4 decimal places.)

1. Calculate Lobster Traps break-even sales dollars before and after automation.

2. Compute Lobster Traps degree of operating leverage before and after automation.

B. Last month, Laredo Company sold 520 units for $60 each. During the month, fixed costs were $8,211 and variable costs were $9 per unit.

(Round your Contribution Margin Ratio to the nearest whole percentage.)

Required:

1. Determine the unit contribution margin and contribution margin ratio.

2. Calculate the break-even point in units and sales dollars.

3. Compute Laredos margin of safety in units and as a percentage of sales.