Using the information above , perform a cost-volume-profit ( CVP ) analysis by completing the steps below . All CVP calculations should be completed in the Hampshire Company Spreadsheet . Note : The CVP analysis satisfies Part A of Section I .
Compute net income before tax .
Compute the unit contribution margin in dollars and the contribution margin ratio for one umbrella .
Calculate the break-even point in units and dollars of revenue . Note : This is a required part of the CVP analysis and satisfies Part C of Section I .
Calculate the margin of safety :
In units
In sales dollars
As a percentage
Calculate the degree of operating leverage .
Assume that sales will increase by 20 % in 2015 . Calculate the percentage of before-tax income for this increase . Provide calculations to prove that your percentage increase is correct based on the operating leverage calculated in step 5 .
Compute the number of umbrellas that Hampshire is required to sell if it plans to earn $ 150,000 in income before taxes by using the target income formula . Proof your calculation .