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Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The

Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020.

Lower Limit Upper Limit

Production (# of boxes) 4,000 6,000

Production Costs:

Direct Materials $60,000 $90,000

Direct Labour . 80,000 120,000

Overhead: Indirect Materials... 25,000 37,500

Indirect Labour . 40,000 50,000

Depreciation . 20,000 20,000

Selling & Administrative Expenses:

Sales Salaries 50,000 65,000

Office Salaries 30,000 30,000

Advertising 45,000 45,000

Other 15,000 20,000

Total $365,000 $477,500

e) Recompute the break-even point in units, assuming that variable costs increased by 20% and fixed costs are reduced by $50,625. How will this impact the margin of safety ratio?

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