The vice-president of sales and marketing, Madison Tremblay, is trying to plan for the coming year in terms of production needs to meet the forecasted sales. The board of directors is very supportive of any initiatives that will lead to increased profits for the company in the upcoming year. Waterways markets a simple water controller and timer that it mass-produces. During 2020, the company sold 322,500 units at an average selling price of $8 per unit. The variable expenses were $1,193,250, and the fixed expenses were $606,300.

What is the products contribution margin ratio? (Round answer to 2 decimal places, e.g. 22.25%.)

Contribution margin ratio

%

What is the companys break-even point in units and in dollars for this product? (Round intermediate calculations to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in units			units
Break-even point in dollars		$

What is the margin of safety, both in dollars and as a ratio? (Round ratio to 2 decimal places, e.g. 25.25%.)

Margin of safety in dollars		$
Margin of safety ratio			%

If management wanted to increase income from this product by 10%, how many additional units would the company have to sell to reach this income level? (Round answer to 0 decimal places, e.g. 5,275.)

Waterways would have to sell an additional

units

If sales increase by 54,000 units and the cost behaviours do not change, how much will income increase on this product?

Income will increase by

$

Waterways is considering mass-producing one of its special-order screens. This would increase variable costs for all screens by an average of $0.54 per unit. The company also estimates that this change could increase the overall number of screens sold by 10%, and the average sales price would increase by $0.19 per unit. Waterways currently sells 374,000 screen units at an average selling price of $25.25. The manufacturing costs are $5,216,000 variable and $1,558,110 fixed. Selling and administrative costs are $2,039,600 variable and $604,160 fixed. If Waterways begins mass-producing its special-order screens, how would this affect the company? (Round contribution margin ratio to 1 decimal place, e.g. 15.2% and operating income to 0 decimal places, e.g. 5,275.)

Current

New

Effect

Contribution margin ratio

%

%

DecreaseIncrease

by

%

Operating income

$

$

IncreaseDecrease

by

$

If the average sales price per screen did not increase when the company began mass-producing the screen, what would be the effect on the company? (Round change in contribution margin ratio to 1 decimal place, e.g. 15.2% and change in profit to 0 decimal places, e.g. 5,275.) Contribution margin ratio will increasedecrease by %. Profit will increasedecrease by $ .