Mathias Corporation manufactures and sells wire rakes. The rakes sell for $20 each. Information about the company's costs is as follows:
Variable manufacturing cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6
Variable selling and administrative cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Fixed manufacturing overhead per month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000
Fixed selling and administrative cost per month . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
a. Determine the company's monthly break-even point in units.
b. Determine the sales volume (in dollars) required for a monthly operating income of $1,200,000.
c. Compute the company's margin of safety if its current monthly sales level is $2,500,000.
d. Estimate the amount by which monthly operating income will increase if the company anticipates a $100,000 increase in monthly sales volume.