Emerald Island Company is considering building a manufacturing plant in County Kerry. Predicting sales of 100,000 units, Emerald Isle estimates the following expenses:

Total Annual Expenses Percent of total annual expenses that are fixed

Materials. . . . . . . . . . . . . . . . . . . . . $19,000 10%

Labor. . . . . . . . . . . . . . . . . . . . . . . . 26,000 20%

Overhead. . . . . . . . . . . . . . . . . . . . 40,000 40%

Marketing and administration. . 14,000 60%

$99,000

An Irish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 10% of the sales price. None of the U.S. home office expense will be allocated to the Irish facility.

REQUIRED:

1. If the unit sales price is $2, how many units must be sold to break even? (Hint: First compute the variable cost per unit.)
2. Calculate the margin of safety ratio.
3. Calculate the contribution margin ratio.