Draaksh Corporation sells premium quality wine for $80 per bottle. Its direct materials and direct labour costs are $15 and $9.00 respectively per bottle. It pays its direct labour employees a wage of $18 per hour.

The company performed a regression analysis using the past 12 months’ data and established the following monthly cost equation for manufacturing overhead costs using direct labour hours as the overhead allocation base:

y = $151,200 + $19.50x

Draaksh believes that the above cost estimates will not substantially change for the next fiscal year. Given the stiff competition in the wine market, Draaksh budgeted an amount of $33,200 per month for sales promotions; additionally, it has decided to offer a sales commission of $4.25 per bottle to its sales personnel. Administrative expenses are expected to be $24,600 per month.


1.

Compute the expected total variable cost per bottle and the expected contribution margin ratio (%).


2.

Compute the annual break-even sales in units and dollars.

(Round your intermediate and final answers to the whole number.)


3.

Draaksh has budgeted sales of $8.1 million for the next fiscal year. What is the company’s margin of safety in dollars and as a percentage of budgeted sales?

(Round your intermediate and final answers to the whole number.)