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seat. It incurs unit variable costs of $ 2 0 0 per seat and fixed costs of $ 2 , 0 0 0 , 0
seat. It incurs unit variable costs of $ per seat and fixed costs of $ It is considering automating the upholstery process, which is now largely manual. It estimates that if it does so its fixed costs will be $ and its unit variable costs will decline to $ per seat.
The contribution margin ratio, breakeven point in sales dollars, margin of safety ratio, and degree of operating leverage based on current activity are as follows:
Contribution margin ratio
Breakeven point in dollars $
Margin of safety ratio
Degree of operating leverage
Assuming the new upholstery system is implemented the contribution margin ratio, breakeven point in sales dollars, margin of safety ratio, and degree of operating leverage are as follows:
Contribution margin ratio
Breakeven point in dollars
$
Margin of safety ratio
Degree of operating leverage
Discuss the implications of adopting the new system
Discuss the implications of adopting the new system
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