The ABC Corporation is a noted candy confectioner who makes some of the best chocolate in the area. A 12-ounce box of chocolate sells for $5.60. The variable unit costs are as follows:

• Coco beans: $1.85
• Butter: .70
• Sugar: .35
• Other items: .34
• Box & Packing Material: .76
• Sales Commission: .20

Fixed overhead cost is $32,300 per year. Fixed selling and administrative costs are $12,500 per year. Menlo Corporation sold 35,000 boxes last year.

Required:

1. What is the contribution margin per unit for a box of chocolate? What is the contribution margin ratio?
2. How many boxes must be sold to break even? What is the break-even in sales revenue?
3. What was the Menlo Corporations operating income last year?
4. What was the margin of safety in sales dollars?
5. Suppose that the Menlo Corporation raises the price to $6.20 per box but anticipates a sales drop to 31,500 boxes. What will be the new break-even point om units? Should the Menlo Corporation raise the price? Explain your rationale.