1First strategySelling price$ 170Variable cost35Contribution
margin135Fixed costs$ 20,000,000
break-even point=Fixed costsCM per unitbreak-even point=$
20,000,000135break-even point148,148unitsSelling price$
170break-even point$ 25,185,160dollarsSecond strategySelling price$
220Variable cost35Contribution margin185Fixed costs$
25,000,000break-even point=Fixed costsCM per unitbreak-even point=$
25,000,000185break-even point135,135unitsSelling price$
220break-even point$ 29,729,700dollars
2First strategyEstimated demand
(units)150,000180,000200,000Selling price per
unit$170$170$170Variable costs per unit$35$35$35Sales (Demand x
SP)$25,500,000$30,600,000$34,000,000Variable costs (Demand x
VC)5,250,0006,300,0007,000,000Contribution
margin20,250,00024,300,00027,000,000Fixed
costs20,000,00020,000,00020,000,000Net income$ 250,000$ 4,300,000$
7,000,000
Second strategyEstimated demand
(units)150,000180,000200,000Selling price per
unit$220$220$220Variable costs per unit$35$35$35Sales (Demand x
SP)$33,000,000$39,600,000$44,000,000Variable costs (Demand x
VC)5,250,0006,300,0007,000,000Contribution
margin27,750,00033,300,00037,000,000Fixed
costs25,000,00025,000,00025,000,000Net income$ 2,750,000$
8,300,000$ 12,000,000
3First strategyMargin of safety in unitsEstimated sales
150,000180,000200,000Break-even point148,148148,148148,148Margin of
safety1,85231,85251,852
Margin of safety in dollarsEstimated sales $ 25,500,000$
30,600,000$ 34,000,000Break-even
point25,185,16025,185,16025,185,160Margin of safety$ 314,840$
5,414,840$ 8,814,840
Second strategyMargin of safety in unitsEstimated sales
150,000180,000200,000Break-even point135,135135,135135,135Margin of
safety14,86544,86564,865
Margin of safety in dollarsEstimated sales $ 33,000,000$
39,600,000$ 44,000,000Break-even
point29,729,70029,729,70029,729,700Margin of safety$ 3,270,300$
9,870,300$ 14,270,300
