Suppose O'Reilly Corp.'s breakeven point is revenues of $1,200,000. Fixed costs are $720,000.

Requirements

1. Compute the contribution margin percentage.

2. Compute the selling price if variable costs are $12 per unit.

3. Suppose 60,000 units are sold. Compute the margin of safety in units and dollars.

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