CONTRIBUTION MARGIN, BREAK-EVEN SALES, MARGIN SAFETY

Supoose that Kiefer had the ff. sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year:

In May of the prior year, Kiefer started an intense quality program designed tro enable it to build original equipment manufacture (OEM) speaker system for a major automobile company. The program was housed in research and development. In the beginning of the current year, Kiefer's aconting department exercised tighter control over sales commisions, ensuring that no dubious (eg. double) payments were made. The increased sales in the current year required additional warehouse space that Kiefer rented in town. (Round ratios to four significant digits. Round sales computations to the nearest dollar.)

Required:

1. Calculate the contribution margin ratio for May of both years.
2. Calculate the break-even point in sales dollars for bth years.
3. Calculate the margin safety in sales dollars for both years.
4. CONCEPTUAL CONNECTION. Analyze the differences shown by your calculations in REquirements 1, 2, and 3.
5. How would you use the concept of Break-even analysis to help you make a decision? Provide examples/scenarios.
6. If a segment/business unit of a company is incurring a net loss but a positive contribution margin, should the segment/business be stopped? Explain.