Question No. 2 (Marks 10)

MURDER TO GO! Writes and manufactures murder mystery parlor games which it sells to retail stores. Shown below is per-unit information relating to the manufacture and sale of this product.

Unit sales price $28

Variable cost per unit $7

Fixed costs per year $240,000

Required:

Determine the following, showing as part of your answer the formula which you used in your computation.

1. Contribution margin ratio
2. Sales volume (in dollars) required to break even
3. Sales volume (in dollars) required to earn an annual operating income of $ 450,000
4. The margin of safety sales volume if annual sales total $40,000 units
5. Operating income if annual sales total 40,000 units