Mustang Ltd. processes cow skins into leather soles for shoes. The unit selling price is $32, the unit variable cost is $24, and fixed costs are $320,000.

Required:

1. Calculate the break-even point in number of units.
2. Calculate the break-even point in sales dollars.
3. How many sales, in units, would be required to earn an operating profit of $40,000?

For partsd,e, andf, assume Mustang is able to reduce its variable costs by $3 per unit.

1. What is the new contribution margin per unit?
2. What is the new break-even point?
3. We are still experiencing the lower variable costs from partsdande. Mustang executives believe that if they lowered the selling price by 10%, they would sell 20% more units. What sales dollar figure would now be required to earn an operating profit of $60,000?
4. At an operating profit of $40,000 and costs as per the initial data, what is the degree of operating leverage?