Sweet Aroma manufactures and sells scented oils to small specialty stores in the greater Dallas area. It presents the monthly operating income statement shown here to Hal Shaw, a potential investor in the business. Help Mr. Shaw understand Sweet Aroma’s cost structure.

1. Recast the income statement to emphasize contribution margin.
2. Calculate the contribution margin percentage and breakeven point in units and revenues for November 2012.
3. What is the margin of safety (in units) for November 2012?
4. If sales in November were only 7,500 units and Sweet Aroma’s tax rate is 30%, calculate its netincome.

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Sweet Aroma Operating Income Statement, November 2012 Units sold Revenues Cost of goods sold 8,000 $64,000 Variable manufacturing costs Fixed manufacturing costs $43,200 12,000 Total Gross margin Operating costs 55,200 8,800 Variable marketing costs Fixed marketing and administration costs 1,600 3,000 Total operating costs Operating income 4,600 4,200