Answer:
Results are below.
Explanation:
<u>To calculate the unitary contribution margin, we need to use the following formula:</u>
Contribution margin= selling price - unitary variable cost
Contribution margin= 164 - 94
Contribution margin= $70
<u>Now, to determine the break-even point in units and sales dollars, we need to use the following formulas:</u>
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 434,000 / 70
Break-even point in units= 6,200
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 434,000 / (70 / 164)
Break-even point (dollars)= $1,016,800
<u>The desired profit is $182,000:</u>
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (434,000 + 182,000) / 70
Break-even point in units= 8,800
<u>Finally, the margin of safety in units, sales dollars, and as a percentage:</u>
Margin of safety (units)= (current sales level - break-even point)
Margin of safety (units)= 8,800 - 6,200
Margin of safety (units)= 2,600
Margin of safety (dollars)= (8,800*164) - 1,016,800
Margin of safety (dollars)= $426,400
Margin of safety ratio= (current sales level - break-even point)/current sales level
Margin of safety ratio= 426,400 / 1,443,200
Margin of safety ratio= 0.295
