1. Erickson, Inc. makes computer bags that sell for $20 each. For the coming year, management expects fixed costs to be $225,000. Variable costs are $14 per unit.

Instructions SHOW YOUR WORK

(a) Compute the break-even point in sales dollars using the contribution margin ratio technique.

(b) Compute margin of safety ratio assuming actual sales are $937,500.

(c) Compute the sales required to earn a net income of $150,000.

(a) Unit Contribution Margin =

Contribution Margin Ratio =

Break-even point in dollars =

(b) Margin of Safety in dollars =

Margin of Safety Ratio =

(c) Required Sales for Targeted Net Income of $150,000 =