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:
$$\begin{array} { | l r | r | } \hline & \text { Total } & \text { Per Unit } \\\hline \text { Sales (20,000 units) } & \$ 1,000,000 & \$ 50.00 \\\hline \text { Direct materials } & \$ 200,000 & \$ 10.00 \\\hline \text { Direct labor (variable) } & \$ 50,000 & \$ 2.50 \\\hline \text { Manufacturing overhead: } & & \\\hline \text { Variable } & \$ 70,000 & \$ 3.50 \\\hline \text { Fixed } & \$ 80,000 & \$ 4.00 \\\hline \text { Selling \& administrative: } & & \\\hline \text { Variable } & \$ 100,000 & \$ 5.00 \\\hline \text { Fixed } & \$ 30,000 & \$ 1.50 \\\hline\end{array}$$
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?