Problem
Red, Inc. produces and sells a single product. Unit costs for direct materials and direct labor are S30 and $20, respectively. In 2016, 12,000 units were produced and total overhead was $284,000. In 2017 total overhead was $204,000 when 7,000 units were produced. Selling price of the unit is $86.
1. Compute the total fixed overhead of the company.
2. Compute the contribution margin ratio.
3. Compute the company's break-even point in sales dollars.
4. Compute the number of units that must be sold to have net income of $50,000 (ignore income taxes).