Question:
Wyatt Inc. expects to maintain the same inventories at the end of the year as at the beginning of the year. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. It is expected that 60,000 units will be sold at a price of $20 per unit. Maximum sales within the relevant range are 70,000 units.
Instructions
1. What is (a) the contribution margin ratio and (b) the unit contribution margin?
2. Determine the break-even point in units.
3. Construct a cost-volume-profit chart, indicating the break-even point.
4. Construct a profit-volume chart, indicating the break-even point.
5. What is the margin of safety?