Break-Even Units and Sales Revenue: Margin of Safety

Dupli-Pro Copy Shop provides photocopying service. Next year, Dupli-Pro estimates it will copy 3,080,000 pages at a price of $0.08 each in the coming year. Product costs include:

Direct materials$0.012Direct labor$0.004Variable overhead$0.002Total fixed overhead$125,500

There is no variable selling expense; fixed selling and administrative expenses total $45,000.

Required:

In your computations that involve the contribution margin ratio, do not round the ratio.

1.Calculate the break-even point in units.

units

2.Calculate the break-even point in sales revenue.

$

3.Calculate the margin of safety in units for the coming year.

units

4.Calculate the margin of safety in sales revenue for the coming year.

$

5.What if the total selling and administrative expenses are reduced to $25,780? Recalculate the following:

a.Break-even point in unitsunits

b.Break-even point in sales revenue$

c.Margin of safety in units for the coming yearunits

d.Margin of safety in sales revenue for the coming year$