Ariba Corporation reaches its breakeven point at $3,200,000 of revenues. At present, it is selling 105,000 units and its variable costs are $30. Fixed manufacturing costs, administrative costs, and marketing costs are $400,000, $250,000, and $150,000 respectively.

Instructions:

1. Compute the contribution margin ratio
2. Compute the selling price
3. Compute the margin of safety in units and dollars.
4. What does this tell you about the risk of Ariba making a loss? What are the most likely reasons for this risk to increase?