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Sunshine Ltd plans to sell 30,000 webcams $120 each in the coming year. The production costs include: Direct material per unit $50 Direct labour per
Sunshine Ltd plans to sell 30,000 webcams $120 each in the coming year. The production costs include:
Direct material per unit $50
Direct labour per unit $10
Variable overhead per unit $5
Fixed overhead $450,000
Variable selling expense per unit is $8 and the total fixed selling and administrative expense is $255,000.
Required:
- Calculate the unit contribution margin.
- Calculate the contribution margin ratio.
- Calculate the break-even point in unit.
- Calculate the margin of safety in unit. If Sunshine Ltd wishes to earn a profit of $564,000 in the coming year, calculate the sales revenue that the company must make to earn the target profit.
- Explain why unit contribution margin becomes profit per unit above the break-even point.
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