Sharp Company makes and sells pencil sharpeners. The variable cost of each sharpener is $20. The sharpeners are sold for $30 each. Fixed operating expenses amount to $40,000.
Required
a. Determine the break-even point in units and sales dollars.
b. Determine the sales volume in units and dollars that is required to attain a profit of $12,000. Verify your answer by preparing an income statement using the contribution margin format.
c. Determine the margin of safety between sales required to attain a profit of $12,000 and break-even sales.