This question is related to using Accounting and Financial information and Break-Even-Point (BEP) and Sales-Volume-Profit Analysis. By doing this exercise, you will be able to calculate profit (or loss) and use accounting and financial information to support management decisions for a small business.

Please suggest the solution/s to the following scenario:

Problem scenario:The following is Addition Corporation's contribution format, income statement for the last month:

Sales

$1,000,000

Less Variable Expenses

(700,000)

Contribution Margin

300,000

Less Fixed Expenses

180,000

Operating Income

120,000

The company has no beginning or ending inventories.A total of 20,000 units were produced and sold last month.

Questions:

1. What is the company's contribution margin ratio?
2. What is the Break-even in units?
3. If sales increase by 100 units, by how much should operating income increase?
4. How many units would the company have to sell to attain target operating profit of $150,000?
5. What is the company's margin of safety?
6. What is the company's Degree of Operating Leverage (DOL)?