Aloha Bags, Inc. produces student book bags that sell for $20 each. For the coming year, management expects fixed costs to be $225,000. Variable costs are $14 per unit. Required:
a. Compute break-even sales in dollars using the mathematical equation.
b. Compute break-even sales using the contribution margin ratio.
c. Compute margin of safety ratio assuming actual sales are $1,200,000.
d. Compute the sales required to earn net income of $150,000, using the mathematical equation.

Solution :

a). At the break even units, the total contribution margin = fixed expenses

  We know that : (Selling price - variable cost) x units sold = fixed expenses  

    i.e.  (20-14)x = 225,000

                  6x   = 225,000

                    x = 37,500

Therefore, the number of units sold, x = 37,500

So, the break even analysis = 37,500 x 20

                                              = 750,000

b).

                                             = 30%

    The Breakeven sales =

                                         = 750,000

c).

                                        = 37.5%

d). Units needed :

       units

Therefore, the sales required = 62,500 x 20

                                                 = 125,000  

answer; ///(d); determining who competes most closely   with whom evaluating whether industry driving forces and competitive pressure favor some strategic groups and hurt others, and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each groups respective market positions;