Calculating break-even point, contribution margin ratio, and margin of safety ratio
Limerick Enterprises, Inc., is considering building a manufacturing plant in Dublin. Predicting sales of 100,000 units, Limerick estimates the following expenses:
Total Annual Expenses
Percent of Total Annual Expenses That Are Fixed
Marketing and administration
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.
1. If the unit sales price is $2, how many units must be sold to break even?
2. Calculate the margin of safety ratio.
3. Calculate the contribution margin ratio.