Problem 7-53 Contribution Margin, Break-Even Units, Break-Even Sales, Margin

of Safety, Degree of Operating Leverage

Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories.

The division's projected income statement for the coming year is:

Sales (203,000 units @ $70) $14,210,000 Total variable cost 8,120,000 Contribution margin $ 6,090,000 Total fixed cost 4,945,500 Operating income $ 1,144,500Basic Sled Aerosled Total Sales $3,000,000 $2,400,000 $5,400,000 Total variable cost 1,000,000 1,000,000 2,000,000 Contribution margin $2,000,000 $1,400,000 $3,400,000 Direct fixed cost 778,000 650,000 1,428,000 Product margin $1,222,000 $ 750,000 $1,972,000 Common fixed cost 198,900 Operating income $1,773,100