Clarification on question

1. That is correct. Variable costs will not change with a change in selling price, only with a change in volume. 2. For breakeven (i.e. profit of zero) the fixed overheads would have to increase by 385 to a total of 455. That is a change of 385/70 = 550% 3. It is faster to calculate the margin of safety using $'s rather than units. The contribution needs to fall by $385 down to $70. This is a % fall of 385/455 = 84.6% (If you prefer units, then the contribution per unit = 455/650 = $0.70. Therefore for breakeven the sales have to be 70/0.70 = 100 units. Therefore the margin of safety = (650 - 100) / 650 )

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