Suppose that Adams Company sells a product for $16. Unit costs are as follows:

Direct materials ..................$3.90

Direct labor ....................1.40

Variable overhead ...................2.10

Variable selling and administrative expense ......1.60

Total fixed overhead is $52,000 per year, and total fixed selling and administrative expense is $37,950.

Required:

1. Calculate the variable cost per unit and the contribution margin per unit.

2. Calculate the contribution margin ratio and the variable cost ratio.

3. Calculate the break-even units.

4. Prepare a contribution margin income statement at the break-even number of units.