### Contribution margin per unit and contribution margin ratio

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Heely Company manufactures a product that sells for \$50 per unit. Heely incurs a variable cost per unit of \$35 and \$2,400,000 in total fixed costs to produce this product. They are currently selling 200,000 units.

Instructions: Using the above data compute A  -  G

Compute the contribution margin per unit and contribution margin ratio. (CM/unit = \$15; CM ratio = 30%)

Compute the break-even point in units. (160,000 units)

Compute the break-even point in dollars. (\$8,000,000)

Compute the margin of safety and margin of safety ratio. (M of S = \$2,000,000; Ratio = 20%)

Compute the number of units that must be sold in order to generate net income of \$300,000 using the contribution margin per unit.( 180,000 units)

Should Heely give a commission to its salesmen based on 10% of sales, if it will decrease fixed costs by \$400,000 and increase sales volume by 20%? Support your answer with labeled computations. (NO; Net income would go from \$600,000 to \$400,000)

What if Heely increases its selling price by 10%. How many units need to be sold to keep the same net income? (150,000 units)

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