Reference no: EM133079357

Question - The revenue and cost structure of Riverstone Limited is as follows: $

Selling Price 130.00

Variable cost per unit 78.00

Contribution per unit 52.00

Fixed costs $1,300,000

Required -

(i) Compute the contribution margin ratio.

(ii) Compute the breakeven point in units and in dollars.

(iii) What is the significance of the breakeven point?

(iv) How many units should be sold if the company wishes to report a profit of $520,000?

(v) The company normally produces and sells 28,000 units. Calculate the margin of safety in units and in dollars.

(vi) As a result of a process review exercise conducted by the company the variable cost per unit was reduced to $58.50. What must the new selling price be if the company is to maintain the contribution margin ratio calculated in Part i?

(vii) What are some of the measures that a company can take to improve its breakeven point?