Suppose McKnight Corp.s breakeven point is revenues of $ 1,500,000. Fixed costs are $ 720,000. Required 1.

Question:

Suppose McKnight Corp.’s breakeven point is revenues of $ 1,500,000. Fixed costs are $ 720,000.

Required

1. Compute the contribution margin percentage.

2. Compute the selling price if variable costs are $ 13 per unit.

3. Suppose 85,000 units are sold. Compute the margin of safety in units and dollars.

4. What does this tell you about the risk of McKnight making a loss? What are the most likely reasons for this risk to increase?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...