Leprechaun Enterprises Inc., is considering building a manufacturing plant in County Cork. Predicting sales of 100,000 units, Leprechaun estimates the following expenses:

Total Percentage of Total

Annual Annual Expenses

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.