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Suppose that you are working for Amenia Ltd. as a junior management accountant. The previous accounting staff has collected the following data for the companys last year of operations:

Sales volume (units)	150,000
Sales revenue:	$2,400,000
Direct materials:	$578,000
Direct labour:	$415,000
Manufacturing overhead*:	$540,000
Selling expenses**:	$360,000
Administrative expenses***:	$420,000
Note that:
*70 variable and 30% fixed
**40% variable and 60% fixed
***20% variable and 80% fixed

The managing director has asked that you undertake a cost-volume-profit (CVP) analysis to assist with planning. (Note: Round all calculations to two decimal places.)

Required:

a)Calculate the breakeven point in units and in dollars for the last year of operations. (6 marks)

b)Based on a recent market study, the managing director has set a target profit (net income) of $450 000 for next year. What are the required sales in units and in dollars for the company to achieve this target? (Assume that information of selling price, variable costs per unit, and fixed costs will remain the same as for the last year of operations.) (4 marks)

c)Assuming that the company meets its target profit (net income) for next year, what will be its margin of safety ratio? (3 marks)

d) When consulting with the managing director about the implication of operating leverage measure, he states that the higher the margin of safety, the better the companys future performance. Do you agree or disagree with his statement? Explain (5marks)

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