Answer:
Explanation:
a. Break even in unit sales = (Fixed expenses ) ÷ (Contribution margin per unit)
= $1,890,000 ÷ ($14,000 - $9,800)
= 450 units
b. Margin of safety = Expected sales - break even sales
= ($14,000 × 600) - ($14,000 × 450)
= $2,100,000
Contribution margin = Sales - Variable cost
= ($14,000 × 600) - ($9,800 × 600)
= $2,520,000
Profit before earning and tax = Contribution margin - Annual fixed cost
= $2,520,000 - $1,890,000
= $630,000
c. Degree of operating leverage = Contribution ÷ Profit before earning and tax
= $2,520,000 ÷ $630,000
= 4
d.
Loss on Net operating income = (Sales) - (Variable cost) - Fixed expenses
=($11,000 × 600) - ($9,800 × 600) - $1,456,000
= -$736,000
