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Jordan Company produces a single product. The projected income statement for the coming month,
based on sales of 20,000 units is:
Sales
$200,000
Less: Variable costs 140,000
Contribution margin $ 60,000
Less: Fixed costs
45,000
Operating income
$ 15,000
Instructions:
1. Compute the unit contribution margin and the number of units that must be sold to break even.
Suppose that 3,000 units are sold above the break-even point. What is the profit?
2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues
are $20,000 greater than expected. What would the total profit be?
3. Compute the margin of safety in sales revenue.
4. Compute the operating leverage.
5. How many units must be sold to earn a profit equal to 10 percent of sales?
6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit
of $18,000?
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