Sales price $25.00 per unit

Variable costs $15.00 per unit

Fixed costs $50,000 Required:

Answer each of the following independent questions.

A. What is the contribution margin per unit?

B. What is the contribution margin ratio?

C. How many units must be sold in order to break even?

D. How many units must be sold in order to earn a target profit of $400,000? (ignore taxes)

E. advertising campaign that has a cost of $70,000. The marketing department estimates that the campaign will increase sales by $250,000. Should the company have the advertising campaign? Why or why not? Show your calculations.

F. If the company sells 6,000 units, what is their operating leverage?