Question 3 Cutlass Company's projected profit for the projected sales in units of 10,000 units for the coming year is as follows: Total Per unit Sales revenue $200,000 $20 Less: Variable costs $120,000 $12 Contribution Margin $ 80,000 $8 Less Fixed expenses $64,000 Profit $16,000 Required 1. Compute the break even point in units and dollars 64,000/8=8000units 2. 3. 4. 5. 6. How many units must be sold to earn a profit before tax of $30,000? (64,000+30,000)/8=94,000/8=11750 units How many units must be sold to earn a profit after tax of $30,000 (assume federal tax rate of 30 percent)? For the projected sales shown in the table, compute the company's margin of safety ratio. Interpret your ratio For the projected sales shown in the table, compute the company's operating leverage. Interpret your ratio. Overall, based on your computations in (4) and (5) do you think the company is risky? Jill Knowall, the marketing manager has come up with a strategy. She believes based on her research that if the selling price is reduced by 20 percent, the sales volume will increase by 30 percent. She thinks the company should adopt her strategy. Evaluate the strategy. (Go back to the original data shown on the table.)