Petram Company offers two products. At present, the following represents the usual

results of a month's operations:

Product KProduct L

PerPerCombined

AmountUnitAmountUnitAmount

Sales revenue ..................... $120,000$1.20$80,000$0.80$200,000

Variable expenses.............. 60,0000.6060,0000.60120,000

Contribution margin .......... $ 60,000$0.60$20,000$0.2080,000

Fixed expenses .................. 50,000

Net operating income........ $ 30,000

Required:

a. Find the break-even point in terms of dollars.

b. Find the margin of safety in terms of dollars.

c. The company is considering decreasing product K's unit sales to 80,000 and increasing product L's unit sales to 180,000, leaving unchanged the selling price per unit, variable expense per unit, and total fixed expenses. Would you advise adopting this plan?

d. Refer to (c) above. Under the new plan, find the break-even point in terms of dollars.

e. Under the new plan in (c) above, find the margin of safety in terms of dollars.