BC Mountain Boots Ltd. is thinking of making a specialty hiking boot for children. The initial research has determined that the boot could sell for $175. Fixed manufacturing overhead is

$136,750 per month. Fixed selling costs are $25,200 per month. Variable costs to manufacture are estimated as follows:

Direct materials -$17.50

Direct labour -5.16

Manufacturing overhead- 1.21

Variable selling cost is estimated at 3.5% of sales.

Required:

a) Calculate the break-even point in units and in dollars.

b) Calculate the new break-even point in units and sales dollars for each of the following independent situations:

i)Variable manufacturing costs increased by 50%.

ii)Fixed manufacturing overhead costs increased by 15% and variable manufacturing costs increased by 60%, except for direct materials, which doubled in price due to a problem with importing leather. Variable selling cost increased to 4% of sales.

iii)The estimated selling price was overestimated, and the actual price is $120.

c)Using the revised estimates from part b) iii) as the best estimate, what is the margin of safety percentage if the company thinks it will sell 2,500 units per month?