Morgan Designs Manufactures Decorative Iron Railings Required:
Compute the Following Items:
A

Essay

Morgan Designs manufactures decorative iron railings. In preparing for next year's operations, management has developed the following estimates:
$\begin{array}{lrrr}&\text { Total}&\text { Per Unit}\\ \text { Sales (20,000 units) } & \$ 1,000,000 & \$ 50.00 \\\text { Direct materials } & \$ 200,000 & \$ 10.00 \\\text { Direct labor (variable) } & \$ 50,000 & \$ 2.50\\\text { Manufacturing overhead: } & & & \\\text { Variable } & \$ 70,000 & \$ 3.50 \\\text { Fixed } & \$ 80,000 & \$ 4.00 \\\text { Selling \& administrative: } & & & & \\\text { Variable } & \$ 100,000 & \$ 5.00 \\\text { Fixed } & \$ 30,000 & \$ 1.50\end{array}$

Required:
Compute the following items:
a. Unit contribution margin.
b. Contribution margin ratio.
c. Break-even in dollar sales.
d. Margin of safety percentage.
e. If the sales volume increases by 20%, with no change in total fixed costs, what will be the change in operating profit?
f. If the per unit variable production costs increase by 15%, and fixed selling and administrative costs increase by 12%, what will be the new break-even point in dollar sales?