Cutlass Company manufactures a single product. In preparing for next year's operations, management has developed the following estimates: Total Per Unit

Sales revenue $200,000 $20

Manufacturing variable cost 90,000 9

Fixed Manufacturing cost 50,000

Selling and Administrative Costs

Variable 30,000 $3

Fixed $14,000

Required: 1. Compute the break-even point in units.

2. How many units must be sold to earn a profit of $30,000?

3. Compute the contribution margin ratio. Using that ratio, compute the additional profit that Cutlass would earn if sales were $25,000 more than expected.

4. Suppose Cutlass would like to earn operating income equal to 20 percent of sales revenue. How many units must be sold for this goal to be realized? Prepare an income statement to prove your answer.

5. For the projected level of sales, compute the margin of safety