Marie Sharp Ltd. is in the business of producing and selling Pepper Sauce. Each bottle of pepper sauce sells for $10. Total fixed expenses related to production are $7,000 per month and variable expenses involved in manufacturing this product is $6 per unit. Monthly sales are 3,000 bottles

Required:

a. Compute break-even point of the company in units using

i. the equation method (4pts)

ii. contribution margin approach (2pts)

2. Prepare a contribution margin income statement to prove your answer. (2pts)
3. Compute the bottles of peppers to be sold to earn a net operating income of $9,500 per month. (2pts)

(Total 10pts)

4. B) Gilley, Inc. sells a single product. The company's most recent income statement is given below.

Sales (4,000 units) $120,000

Less variable expenses (68,000)

Contribution margin 52,000

Less fixed expenses (40,000)

Net income $ 12,000

Required:

a. Contribution margin per unit is $ ________ per unit (2pts)

b. If sales are doubled to $240,000, Total variable costs will equal $ ________ (2pts)

c. If 10 more units are sold, profits will increase by $ ________ (2pts)

d. Compute how many units must be sold to break even. # ________ (2pts)

e. Compute how many units must be sold to achieve profits of $20,000. # ________ (2pts)

(Total 10pts)