Contribution Margin, CVP, Net Income, Margin of Safety

Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows:

Acrylic base		$0.86		Bottle, packing material		$1.15
Pigments		0.57		Selling commission		0.14
Other ingredients		0.43

Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year.

Required:

1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent. $fill in the blank 1 per unit

What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.) fill in the blank 2

2. How many bottles must be sold to break even? fill in the blank 3 bottles

What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations. $fill in the blank 4

3. What was Nail Glows operating income last year? $fill in the blank 5

4. What was the margin of safety in revenue? $fill in the blank 6

5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units. fill in the blank 7 bottles

Should Nail Glow raise the price?

Yes, operating income will increaseNo, operating income will decreaseCannot determine, insufficient information is given