Question1. The management of Leonard's Ltd. is involved in preliminary analysis of a potential new product. The product will sell for $35 per unit and needs variable costs of $20 per unit. Fixed costs are expected to be $30,000 per month.
1. What is the break-even in units?
2. What is the break-even in dollars?
2. What is the annual sales volume (in $) which is needed to earn $130,000 before taxes?
3. What is the margin of safety ratio, given the information in part 3?
4. How many units should be sold each month to earn an annual after-tax profit of $325,000 given a tax rate of 40%? (Keep in mind you can’t sell partial units)