Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The current operating income for Bay Area Cycles Co. is $52,000. The selling price per unit is $100, the contribution margin ratio is 20%, and fixed expense is $208,000.
Break-even point= fixed costs/ contribution margin
Break-even point= Break-even point (dollars)/ selling price
Break-even point= 1,040,000/100= 10,400 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 208,000/ 0.20= $1,040,000
Current sales level= 52,000 + 208,000= $260,000
Margin of safety in untis= 2,600 - 10,400= - 7,800 units
Margin of safety ratio= -7,800/2,600= -300%
