Stuart Modems, Incorporated makes modem cards that are used in notebook computers. The company completed the following transactions during year $1.$ All purchases and sales were made with cash.

Acquired $$900,000$ of cash from the owners.

Purchased $$345,000$ of manufacturing equipment. The equipment has a $$45,000$ salvage value and a four$-$year useful life.

The company started and completed $6,500$ modems. Direct materials purchased and used amounted to $$55$ per unit.

Direct labor costs amounted to $$40$ per unit.

The cost of manufacturing supplies used amounted to $$19$ per unit.

The company paid $$65,000$ to rent the manufacturing facility.

Stuart sold all $6,500$ units at a cash price of $$195$ per unit.

The sales staff was paid a $$13\mathrm{.}50$ per unit sales commission.

Paid $$54,000$ to purchase equipment for administrative offices. The equipment was expected to have a $$4,500$ salvage value and a three$-$year useful life.

Administrative expenses consisting of office rental and salaries amounted to $$83,800.$

Required

a$.$Use the following partially completed form to prepare an income statement using the contribution margin format.

b$.$etermine the break$-$even point in units and in dollars.

c$.$Assume that next year$$s sales are budgeted to be the same as the current year$$s sales. Determine the margin of safety expressed as a percentage.