The Valley Video Shop has two employees.

The Valley Video Shop has two employees. The manager, J.J., is paid $2,200 per month. The other employee, Bob: is paid $1,200 per month. In addition, Bob is paid a commission of 20 cents per video that is rented. Other monthly costs are: store rent $1,000 plus 10 cents per rented video. depreciation on videos $1,000, utilities $400, and advertising $400. The rental fee for a video is $2.00.

Instructions

(a) Determine the variable cost per rented video and the total monthly fixed costs.

(b) Compute the break-even point in units and dollars.

(c) Determine the rentals required to earn net income of $2,000.

(d) Determine the margin of safety and margin of safety ratio, assuming 5,000 videos are rented in a month.