This year Bearcat Company sold 30,000 units of its only product for $30 per unit. Manufacturing and selling the product required $150,000 of fixed manufacturing costs and $200,000 of fixed selling and administrative costs. Its per unit variable costs are as follows:

Direct material	$8.00
Direct labor	$5.00
Variable overhead	$1.00
Variable selling and administrative costs	$1.00

Required

1. Compute the contribution margin per unit for the current year.
2. Compute the contribution margin ratio for the current year.
3. Compute the break-even point in units for the current year.
4. Computer the break-even point in dollars for the current year.
5. Prepare the contribution margin income statement for the current year using the 30,000 units sold.
6. Assume the company wants to earn a pretax profit of $200,000. How many units would the company need to sell to achieve this level of profit?
7. Next year the company plans to use new materials which will reduce direct materials costs to $5.00 per unit and direct labor costs to $2.00 per unit and not affect product quality or marketability. The use of the new materials will require the purchase of a new machine which will increase fixed manufacturing costs to $250,000. Compute the following for next year:
   1. Contribution margin per unit.
   2. Break-even point in units.
   3. Should the company use the new materials? Provide evidence to support your decision.