Break-Even, Margin of Safety, and Target Net Income
Zootsuit Inc. makes travel bags that sell for $56 each. For the coming year, management expects fixed costs to total $320,000 and variable costs to be $42 per unit. Compute the following:
(a) break-even point in dollars using the contribution margin (CM) ratio; (b) the margin of safety and margin of safety ratio assuming actual sales are $1,382,400; and (c) the sales dollars required to earn net income of $410,000.
