$
Sales		900,000.00
Less cost of goods sold:	384,000.00
Direct materials	204,000.00
Variable factory overhead	28,000.00	704,000.00
Gross profit		196,000.00
Less operating expenses:
Selling
Variable expenses	66,000.0
Fixed expenses	11,040.00	77,040.00
Administration		118,960.00
Variable expenses	50,000.00
Fixed expenses	23,200.00	73,200.00
Net profit		45,760.00

1 Recast the income statement to determine the contribution margin.

2 Perform cost volume profit (CVP) analysis to determine the breakeven point, e.g. the number of units that must be sold to breakeven and the dollar value at breakeven point if 180, 000 units are produced.

3 Confirm your calculations in (2) are approximately correct by performing a break-even analysis using the contribution margin ratio method.

4 What if net profit increased by $30,000, determine the new breakeven point for no of units to be sold.

5 If the new net profit figure is required after tax, calculate the net profit before tax if the company pays tax at the rate of 30%.

6 What is the margin of safety between budgeted sales and break-even sales amounts expressed as a percentage?

7 What are three (3) limitations with respect to the assumptions made in cost volume profit (CVP) analysis?