Robin Simmons is ready to complete acost-volume-profit analysis for 2016 for the Stellar Packaging Productsmanufacturing plant to determine if the break-even point is achieved, given theexpected decline in volume. Specific costs for production of 500,000 unitsinclude the following:
Stellar Packaging Products
Variable Costs Total
Fixed Costs Total
Rawmaterials
$400,000
Directmanufacturing labor
$200,000
Indirectmanufacturing labor
$105,000
FactoryInsurance & Utilities
$63,000
Depreciation— Machinery and factory
$38,500
Repairsand maintenance — factory
$28,000
Selling,marketing and distribution expenses
$40,000
$80,000
Generaland administrative expenses
$120,000
There are no beginning or endinginventories. The total sales for 500,000 units produced are $2,000,000.Instructions:Answer the following questions giventhe fact pattern above, showing all calculations.1.What is the contribution margin per unit for each chocolate barproduced, given the fact pattern above?2.What is the Stellar Packaging’s U.S. division break-even point in unitsand dollars, given the fact pattern above?3.What is the Stellar Packaging’s U.S. division margin of safety anddegree of operating leverage, given the fact pattern above?4.Write a brief explanation (approximately two paragraphs) that Simmonsmight deliver to management to inform them of the analytical outcome, given theprojected revenue and cost. Does the company have to implement a cost-reductionstrategy in order to break even?