Shimano Pty Ltd builds custom made fishing rods for game fishing. Each rod sells for $900 and the variable costs per rod are 60% of the selling price. In 2021 the business incurs fixed costs of $108,000.

Required:

Calculate the following showing all your workings.

a) Contribution margin ratio

b) Annual break-even point in sales units

c) The margin of safety percentage assuming that expected sales were $360,000 . d) Explain how Shimano Ltds management may interpret your calculation of the margin of safety percentage in (c) above.