Q2 - Need Answers for Part 4 & 5

Contribution Margin, CVP, Net Income, Margin of Safety Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows: Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year. Required: 1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent. per unit What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimalbased amount rather than a whole percent.) 2. How many bottles must be sold to break even? bottles What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations. q 3. What was Nail Glow's operating income last year? What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations. 3. What was Nail Glow's operating income last year? 4. What was the margin of safety in revenue? 5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units. bottles Should Nail Glow raise the price? Feedback Check My Work 1. Price is a part of the calculation. Contribution Margin ratio is Contribution Margin divided by selling price. 2. Use either (Break-even units x Price) or Contribution margin ratio (Total fixed cost/Sales). Break-even in units can be calculated by taking fixed costs/contribution margin per unit