Diego Company manufactures one product that is sold for $80 per unit. The following information pertains to the companys first year of operations in which it produced 40,000 units and sold 35,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$24
Direct labour	$14
Variable manufacturing overhead	$2
Variable selling and administrative	$4
Fixed costs per year:
Fixed manufacturing overhead	$800,000
Fixed selling and administrative expenses	$496,000

1. What is the companys break-even point in unit sales? Is it above or below the actual sales volume? Compare the break-even sales volume to your answer for question 6 and comment.
2. What is the CM ratio under variable costing?

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