QUESTION 1

North-western Company sells several products. Information of average revenue and costs are as follows:

Selling pric per unit$20.00

Variable costs per unit:

Direct materials $4.00

Direct manufacturing labor $1.60

Manufacturing overhead $0.40

Selling costs $2.00

Annual fixed costs $96,000

a)Calculate the contribution margin per unit.

b)Calculate the number of units Northwestern's must sell each year to break even.

c)Calculate the number of units Northwestern's must sell to yield a profit of $144,000.

d)Calculate Margin of safety in units and percentage terms