Cornerstone Exercise 16.6 (Algorithmic) Break-Even Units and Sales Revenue: Margin of Safety

Dupli-Pro Copy Shop provides photocopying service. Next year, Dupli-Pro estimates it will copy 2,920,000 pages at a price of $0.08 each in the coming year. Product costs include:

Direct materials	$0.012
Direct labor	$0.004
Variable overhead	$0.002
Total fixed overhead	$113,240

There is no variable selling expense; fixed selling and administrative expenses total $43,000.

Required:

In your computations that involve the contribution margin ratio, do not round the ratio.

1. Calculate the break-even point in units. units

2. Calculate the break-even point in sales revenue. $

3. Calculate the margin of safety in units for the coming year. units

4. Calculate the margin of safety in sales revenue for the coming year. $

5. What if the total selling and administrative expenses are reduced to $24,400? Recalculate the following:

a. Break-even point in units		units
b. Break-even point in sales revenue	$
c. Margin of safety in units for the coming year		units
d. Margin of safety in sales revenue for the coming year	$