1. Compute the contribution margin ratio
2. Calculate the breakeven sales revenue
3. Compute the margin of safety, based on the estimated sales revenue for 2014
4. Prepare an income statement showing net income if the firm sold 350 000 units in 2014
5. The business wishes to earn an after tax profit of $2 500 000 in 2014. How many units would it have to sell? Assume a tax rate is 25%
6. Tracking has been advised that it can sell 10% more units if it did the following:

1. Reduce selling price by 5%
2. Hire two more salesmen, who would be paid $35 000 each annually
3. Use different materials, which would reduce variable manufacturing costs by 8%

Compute the companys breakeven units, assuming that the new plans were implemented.

Total Unit Sales revenue (280 000 units) $7,000,000 $25.00 Less Variable manufacturing costs $3,080,000 $11.00 Variable selling costs $980,000 $3.50 Contribution $2,940,000 Less Fixed manufacturing overheads 1,500,000 Fixed Selling and Admin overheads 850,000 Net Income $590,000