1 ABC Company manufactures and sells a telephone answering machine . The company's income statement for the most recent year is given below Based on the above data,answer the following question. A. Compute the company's cm ratio and variable expense ratio B. Compute the company's break -even point in both unit and sales birra Use the above three approaches to compute the break -even point

## Step 1: Compute the Contribution Margin (CM) Ratio<br />### The CM ratio is calculated by dividing the total contribution margin by the total sales. <br />\[<br />\text{CM Ratio} = \frac{\text{Total Contribution Margin}}{\text{Total Sales}}<br />\]<br />Given:<br />- Total Contribution Margin = Br. 300,000<br />- Total Sales = Br. 1,200,000<br /><br />\[<br />\text{CM Ratio} = \frac{300,000}{1,200,000} = 0.25 \text{ or } 25\%<br />\]<br /><br />## Step 2: Compute the Variable Expense Ratio<br />### The variable expense ratio is calculated by dividing the total variable expenses by the total sales.<br />\[<br />\text{Variable Expense Ratio} = \frac{\text{Total Variable Expenses}}{\text{Total Sales}}<br />\]<br />Given:<br />- Total Variable Expenses = Br. 900,000<br />- Total Sales = Br. 1,200,000<br /><br />\[<br />\text{Variable Expense Ratio} = \frac{900,000}{1,200,000} = 0.75 \text{ or } 75\%<br />\]<br /><br />## Step 3: Compute the Break-Even Point in Units<br />### The break-even point in units is calculated by dividing the total fixed expenses by the contribution margin per unit.<br />\[<br />\text{Break-Even Point (Units)} = \frac{\text{Total Fixed Expenses}}{\text{Contribution Margin per Unit}}<br />\]<br />Given:<br />- Total Fixed Expenses = Br. 240,000<br />- Contribution Margin per Unit = Br. 15<br /><br />\[<br />\text{Break-Even Point (Units)} = \frac{240,000}{15} = 16,000 \text{ units}<br />\]<br /><br />## Step 4: Compute the Break-Even Point in Sales Birr<br />### The break-even point in sales birr is calculated by dividing the total fixed expenses by the CM ratio.<br />\[<br />\text{Break-Even Point (Sales Birr)} = \frac{\text{Total Fixed Expenses}}{\text{CM Ratio}}<br />\]<br />Given:<br />- Total Fixed Expenses = Br. 240,000<br />- CM Ratio = 0.25<br /><br />\[<br />\text{Break-Even Point (Sales Birr)} = \frac{240,000}{0.25} = 960,000 \text{ Birr}<br />\]