Question:
The following financial data provides information regarding the total cost for the period when the company sold 100,000 units.
|
Sales
|
$700,000
|
|
Variable costs
|
400,000
|
|
Fixed costs
|
200,000
|
1. Compute the company's per-unit contribution margin.
2. Compute the company's break-even point in units.
3. What is the safety margin in units?
4. How many total units must company sell to produce a target net profit of $60,000?
5. The company may increase sales by $4,000 if advertising expenditures can increase by $30,00. What would be the effect on income if the company increases advertising expenditures? Would you recommend this advertising campaign?