Problem
Assume the following information is known for Wonderful Wallets Company:
• The average sales price per unit is $40.
• Variable costs per wallet are $12, and fixed costs are $2,184.
• The relevant range is from 0 units to 350 units.
• The company uses the high-low method to separate total costs into variable and fixed costs.
1) What is the contribution margin ratio?
2) What is breakeven in units and sales dollars?
3) What is the margin of safety if 300 units are sold?
4) What is the operating income if 80 units are sold?
5) Now assume that the company wishes to have $140 of operating income. How many units must the company sell?