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Sacha Lakic

19. Sacha Lakic, is a designer of exclusive European furniture and accessories. One item he designs, Meuble de Rangement (a storage unit) sells for $1,000 per unit. Below is Mr. Lakic's contribution format income statement for last month:
Sales $4,000,000
Less Variable Expenses 2,800,000
Contribution Margin 1,200,000
Less Fixed Expenses 720,000
Net Income $ 480,000

Sacha has no beginning or ending inventories. A total of 4,000 units were produced and sold last month. Compute the following:

(a) Breakeven in sales dollars and units?

(b) How many units need to be sold to attain target profits of $600,000?

(c) What is the Sacha's margin of safety?

(d) What is the degree of operating leverage?


Solution Preview

a) Breakeven in sales dollars and units?

BEP = Fixed Cost / contribution margin per unit

contribution margin = 1,200,000 / 4000 = $300 per ...