Problem 5

Johnson Inc. expects to maintain the same inventories at the end of the year as at the beginning of the year. The estimated fixed costs for the year are $ 360,000, and the estimated variable costs per unit are $ 9. It is expected that 75,000 units will be sold at a price of $ 15 per unit. Maximum sales within the relevant range are 80,000 units.

Instructions

1. What is (a) the contribution ratio and (b) the unit contribution margin?

2. Determine the break-even point in units

3. Construct a cost-volume-profit chart, indicting the break-even point

4. What is the margin of safety