Question Content Area

Break-Even Units and Sales Revenue: Margin of Safety

Dupli-Pro Copy Shop provides photocopying service. Next year, Dupli-Pro estimates it will copy 2,930,000 pages at a price of $0.08 each in the coming year. Product costs include:

Direct materials	$0.012
Direct labor	$0.004
Variable overhead	$0.002
Total fixed overhead	$126,780

There is no variable selling expense; fixed selling and administrative expenses total $40,000.

Required:

In your computations that involve the contribution margin ratio, do not round the ratio.

1. Calculate the break-even point in units. 2,690,000

2. Calculate the break-even point in sales revenue. 215,200

3. Calculate the margin of safety in units for the coming year. 240,000

4. Calculate the margin of safety in sales revenue for the coming year. 19200

5. What if the total selling and administrative expenses are reduced to $18,920? Recalculate the following:

a. Break-even point in units		units
b. Break-even point in sales revenue
c. Margin of safety in units for the coming year		units
d. Margin of safety in sales revenue for the coming year