PROBLEM 2 (CVP Analysis \& Incremental Analysis) 25 MARKS Part A 10 Marks Frixion Inc. is undergoing an analysis of one of the products it produces, the Sharpilite. Each Sharpilite is sold for $50. The variable cost per unit is $25, and the company's monthly fixed cost is $27,650. Required: a) Compute the product's contribution margin per unit and contribution margin ratio. 2 Marks b) Compute the breakeven point in units and sales dollars. 3 Marks c) If the company wants to earn a target income of $73,000 on this product, compute the level of sales dollars required. 3 Marks d) If the company achieves this level of sales (from part c), compute its margin of safety (i) in dollars and (ii) as a ratio with respect to the Sharpilite. 2 Marks Part B 5 Marks Frixion Inc. manufactures and sells three different models of cabinets in another of its divisions. Although the cabinets vary in terms of quality and features, all are good sellers. Frixion is currently operating at full capacity with limited machine time. Sales and production information relevant to each model is shown below: Required: If additional machine time could be obtained, how should the additional time be used? 5 Marks Part C 10 Marks of these units each year. The variable costs for each unit are as follows: A foreign company has offered to purchase 15,000 of these units at $2.75 per unit. The production of these units is near full capacity at Frixion Inc., so to accept this offer would require Frixion Inc. temporarily adding another shift to its production line. To do this would increase variable manufacturing costs by $0.20 per unit. However, variable selling costs would be reduced by $0.20 a unit. Frixion Inc. will also incur additional fixed costs of $1,500. Required: Given the information above should Frixion Inc. accept this special order from the foreign buyer? 10 Marks