Pearson Company estimates that variable costs will be 60% of sales, and fixed costs will total $800,000. The selling price of the product is $4.

Instructions

(a) Prepare a CVP graph, assuming maximum sales of $3,200,000. (Use $400,000 increments for sales and costs and 100,000 increments for units.)

(b) Compute the break-even point in

(1) Units

(2) Dollars.

(c) Compute the margin of safety in

(1) Dollars

(2) As a ratio, assuming actual sales are $2.5 million.