Question:
Harder company manufactures a product thats sells for $50 per unit. Harder incurrs a variable cost per unit of $30 and $3,400,000 in total fixed costs to produce this product. It is currently selling 200,000 units.
Instructions: Complete each of the following requirements, presenting labeled supporting computation
(a) Compute and label the contribution margin per unit and contribution margin ratio.
(b) Using the contribution margin per unit, compute the break-even point in units.
(c) Using the contribution margin ratio, compute the break-even point in dollars.
(d) Compute the margin of safety and margin of safety ratio.
(e) Compute the number of units that must be sold in order to generate net income of $400,000 using the contribution margin per unit.
(f) Should Harder give a commission to its salesman based on 10% of sales, if it will decrease fixed costs by $400,000 and increase sales volume 10%? Support your answer with labeled computations.