ABC Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Show your calculations

a. What is the contribution margin ratio? What does it mean? b. If sales increase to 6,040 units, what would be the estimated increase in net operating income? c. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what would be the estimated net operating income? Would you recommend this scenario? Why? d. What is the break-even point in units and in dollars? e. What is the margin of safety in units? f. What is the degree of operating leverage? If the ABC Corporation plans to increase its sales by 10%, what would be the estimated net operating income? (Use the concept of degree of operating leverage to estimate the net operating income)? g. Estimate how many units must be sold to achieve a target profit of $26,100.

Sales (6,000 units) Variable expenses Contribution margin Fixed expenses Net operating income $300,000 240,000 60,000 58,800 $1.200