Suppose McKnight Corp.'s breakeven point is revenues of $1,200,000. Fixed costs are $660,000.

Requirements

1. Compute the contribution margin percentage

2. Compute the selling price if variable costs are $18 per unit

3. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars.

4. What does this tell you about the risk of McKnight making a loss? What are the most likely reasons for this risk to increase?