Suppose that Bissonette Company had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year:

In August of the prior year, Bissonette started an intensive quality program designed to enable it to build original equipment manufacturer (OEM) speaker systems for a major automobile company. The program was housed in research and development. The increased sales in the current year required additional warehouse space that Bissonette rented in town.
Required:
1. Calculate the contribution margin ratio for May of both years.
2. Calculate the break-even point in sales dollars for both years.
3. Calculate the margin of safety in sales dollars for both years.
4. Analyze the differences shown by your calculations in Requirements 1, 2, and 3.

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May, May, Current Year Prior Year $ 43,560 $ 41,700 Total sales Less: (17,000) (1,400) (1,250) 23,910 Purchase price paid Additional labour and supplies (16,000) (1,200) (1,100) 23,400 Commissions Contribution margin Less: Fixed warehouse cost Fixed administrative cost Fixed selling cost Research and development Operating income (680) (4,300) (5,600) (9,750) $ 3,580 (500) (4,300) (5,000) (4,000) $ 9,600