Erickson, Inc. makes student book 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

(a) Compute break-even sales in dollars using the mathematical equation.

(b) Compute break-even sales using the contribution margin ratio.

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

(d) Compute the sales required to earn net income of $150,000, using the mathematical equation.