Question 1

Auto Tires, Inc. sells tires to service stations for an average of $145 each. The variable costs of each tire is $85 and monthly fixed manufacturing costs total $45,000. Other monthly fixed costs of the company total $15,000.

Required:

1. What is the break-even level in tires?

2. What is the margin of safety, assuming sales total $190,000?

3. What is the break-even level in tires, assuming variable costs increase by 20 percent and selling price increase by 17 per unit?

4. What is the break-even level in tires, assuming the selling price goes up by 20 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $1500and variable cost decrease by 1 per unit?