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Calculate the contribution margin ratio

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Question - Emerald Island Company is considering building a manufacturing plant in County Kerry. Predicting sales of 100,000 units, Emerald Isle estimates the following expenses:

Total Annual Expenses Percent of total annual expenses that are fixed

Materials $19,000 10%

Labor 26,000 20%

Overhead 40,000 40%

Marketing and administration 14,000 60%

$99,000

An Irish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 10% of the sales price. None of the U.S. home office expense will be allocated to the Irish facility.

REQUIRED -

1. If the unit sales price is $2, how many units must be sold to break even? (Hint: First compute the variable cost per unit.)

2. Calculate the margin of safety ratio.

3. Calculate the contribution margin ratio.

Reference no: EM132755589

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