Mestham Products Ltd produces pocket size calculators that are sold for $ 10 per unit. The costs associated with each unit are as follows: Direct materials = $ 3.00, Direct labour = $ 0.25, Variable overhead = $ 2.00, and variable selling and administrative cost = $ 0.75. Total fixed costs are $ 100,000 for manufacturing activities and $ 20,000 for the selling and administrative functions. In a recent meeting, the board of directors asked the accounting function to perform a cost-volume-analysis and produce a break-even chart based on the current revenue and cost functions of the Company.

Required:

1. (5 points) What isMestham Products'current per-unit contribution ratio?
2. (5 points)What areMestham Products'break-even revenues?
3. (7.5 points)What target revenues should be to earn net profits of $ 40,000?
4. (7.5 points)What target revenues should be to earn a return on sales (i.e., net profits over revenues) of 20%?