Exercise 4-27: Leverage Burton Inc.'s projected operating income (based on sales of 350,000 units) for the coming year is as follows:

Sales $8400000

Less: Variable Expenses 6720000

Contribution Margin 1680000

Less: Fixed Expenses

1512000

Operating Income$168000

Required:

1. Compute: a. Variable cost per unit b. Contribution margin per unit c. Contribution margin ratio d. Break-even point in units e. Break-even point in sales dollars

2. How many units must be sold to earn operating income of $300,000?

3. Compute the additional operating income that Burton would earn if sales were $50,000 more

than expected.

4. For the originally projected level of sales, compute the margin of safety in units, and then in

sales dollars.

5. Compute the degree of operating leverage.

6. Compute the new operating income if sales are 10 percent higher than expected.