Problem 1:

SMSA currently delivers packages for $10 each. During the month, units sold were 4500 units, fixed costs were $18,000 and variable costs were 40% of sales.

Instructions:

1.Compute the break-even point in sales dollars.

2.Compute the sales required to earn net income of $ 42,000.

3.Compute the margin of safety dollars.

4.Compute the margin of safety ratio.

Problem2:

Giant Manufacturing Co., sells three types of bicycles. It has fixed costs of $350,000 per month. The sales and variable costs of these products for July are as follows:

Bikes

RacingMountain Touring

Sales$1,200,000$1,800,000$2,000,000

Variable costs800,000 1000,0001,400,000

Instructions:

Compute the break-even point in sales dollars.