Problem
The information that follows is the total cost for the period when the company sold 50 000 units.
Sales $800.000
Variable costs 300,000
Fixed costs 200,000
Required:
A. Compute the company's per-unit contribution margin.
B. Compute the company's break-even point in units.
C. What is the safety margin in units?
D. How many total units must company sell to produce a target net profit of $70,000?
E. The sales manager believes the company could increase sales by 5,000 units if advertising expenditures were increased by $30,000. Determine the dollar effect on income if the company increases advertising expenditures. Would you recommend this advertising campaign? Why?