Suppose that Adams Company sells a product for $24. Unit costs are as follows:

Direct materials.............................................$5.85

Direct labour.................................................2.10

Variable overhead............................................3.15

Variable selling and administrative expense............2.40

Total fixed manufacturing overhead is $78,000 per year, and total fixed selling and administrative expense is $56,925.

Required:

1. Calculate the variable cost per unit and the contribution margin per unit.

2. Calculate the contribution margin ratio and the variable cost ratio.

3. Calculate the break-even units.

4. Prepare a contribution margin income statement at the break-even number of units.