Current operating income for Bay Area Cycles Co. is $38,000. Selling price per unit is $100, the contribution margin ratio is 25%, and fixed expense is $152,000.

Required:

1. Calculate Bay Area Cycle’s per unit variable expense and contribution margin. How many units are currently being sold?

	Per Unit	Volume	Total	Ratio
Revenue	$ 100.00			100	%
Variable expense					%
Contribution margin				25	%
Fixed expense			(152,000)
Operating income			$ 38,000

2. How many additional unit sales would be necessary to achieve operating income of $95,000?

Additional unit sales

2,280

units

Current operating income for Bay Area Cycles Co. is $26,000. Selling price per unit is $100, the contribution margin ratio is 25%, and fixed expense is $104,000.

Required:

1. Calculate Bay Area Cycle’s breakeven point in units and total sales dollars.

Break-even units
Break-even dollars

2. Calculate Bay Area Cycle’s margin of safety and margin of safety ratio.

Margin of safety
Margin of safety ratio		%