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ACME Inc., a merchandiser, purchases their product for $2.80 each and sells them for $12 each. In addition to the sales' staff regular salary of
ACME Inc., a merchandiser, purchases their product for $2.80 each and sells them for $12 each. In addition to the sales' staff regular salary of $2,500 per month, the company also pay a sales commission of $2 per unit sold. The company had the following operating results for the year ending December 31, 2022: Sales Cost of goods sold Sales commissions Salaries expense Rent expense $84,000 19,600 14,000 30,000 6,000 Required: 1. Prepare the contribution margin income statement, in good form. (6 marks) 2. Calculate the current degree of operating leverage. (2 marks) 3. If the company sells 500 additional units, what will be the increase in net income? (2 marks) 4. Calculate the breakeven point in both unit sales and sales dollars. (4 marks) 5. Calculate the margin of safety in both unit sales and sales dollars. (4 marks) 6. Calculate the total sales in units needed to reach a target profit of $25,000. (3 marks).
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