Bono Manufacturing makes a product that currently sells for $20 each. The variable costs to make this product are $12 per unit. Fixed costs total are $800,000 per year.
A. How many units must be sold to break even?
B. What will be the company's sales revenue ($) at the break-even point?
C. Assume that the company's current sales are $2.6 million (130,000 units) per year. Calculate the company's margin of safety:
i. in dollars
ii. in units
iii. as a percentage
D. Assume that one of Bono's major competitors has a margin of safety of 35%. Which company is more recession proof: Bono or its competitor? Why?