Crandon Manufacturing Company had net income of $420,000 in 2014 when the selling price per unit was $200 and data for variable and fixed costs were as follows:

Cost Schedule:

Variable Costs:

Direct Material $20

Direct Labour $50

Variable Manufacturing Overhead $10

Total $80

Fixed Costs:

Manufacturing Overhead $145,000

Advertising 25,000

Administrative 130,000

Total $300,000

Required:

i) Compute the number of units sold in 2014, using the equation method.

ii) Calculate Crandons break-even point in units and in dollars.

iii) Calculate the margin of safety in number of units and sales dollars.

iv) Using the sales units calculated in (i), prepare a contribution margin income statement for the year ended December 31, 2014, detailing the components of total fixed costs, and clearly showing contribution and net income.

v) The president of Crandon Manufacturing is under pressure from stockholders to increase operating income by $48,000 in 2015. Management expects per unit data and total fixed costs to remain the same in 2015. Compute the number of units that must be sold in 2015 to reach the shareholders desired profit level. Is this a realistic goal?

vi) Assume that Crandon Manufacturing sells the same number of units in 2015 as it did in 2014. Assuming unit variable costs and total fixed costs remain unchanged, what would the selling price have to be in order to reach the stockholders desired profit level?

vii) Using the sales units calculated in (i), construct a traditional breakeven chart for Crandon Manufacturing Company, clearly showing the breakeven point and the margin of safety in units and dollars and the region representing profits and losses. [Use a scale of 2 cm to represent 2,000 units on the x-axis and 2cm to represent $200,000 on the y-axis].