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 (3 marks).

b) Annual break-even point in sales units (2 marks).

c) The margin of safety percentage assuming that expected sales were $360,000 (3 marks).

d) Explain how Shimano Ltds management may interpret your calculation of the margin of safety percentage in (c) above. (1 mark)