A product sells for $220 per unit, and its variable costs per unit are $146. The fixed costs are $424,000. If the firm wants to earn $59,960 pretax income, how many units must be sold

	6,940.
	6,740.
	6,640.
	6,540.
	6,840.

Psi Company is designing a new line of shoes called the Kappa. The shoes will sell for $360 per pair and cost $262.80 per pair in variable costs to make.

(1)	Compute the contribution margin per pair. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Contribution margin

$ per unit

(2)	Compute the contribution margin ratio. (Round your intermediate calculation to 2 decimal places. Omit the "%" sign in your response.)

Contribution margin ratio

%

Which of the following is the correct interpretation of a degree of operating leverage of 5?

	Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point.
	Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point.
	Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit.
	Operating leverage of 5 measures the degree of debt employed by the firm's debt structure.
	Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.