Problem 3-54 (Algo) CVP, Operating Leverage, and Margin of Safety Percentage (LO 3-1, 2, 4) Canton Corp. produces a part

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Problem 3-54 (Algo) CVP, Operating Leverage, and Margin of
Safety Percentage (LO 3-1, 2, 4)
Canton Corp. produces a part using an expensive proprietary
machine that can only be leased. The leasing company offers two
contracts. The first (unit-rate lease) is one where Canton would
pay $6 per unit produced, regardless of the number of units. The
second lease option (flat-rate lease) is one where Canton would pay
$90,000 per month, regardless of the number produced. The lease
will run one year and the lease option chosen cannot be changed
during the lease. All other lease terms are the same.
The part sells for $60 per unit and unit variable cost
(excluding any machine lease costs) are $30. Monthly fixed costs
(excluding any machine lease costs) are $240,000.
Required:
a. What is the monthly break-even level assuming:
1. The unit-rate lease?
2. The flat-rate lease?
b. At what volume would the operating profit be the same
regardless of the lease option chosen?
c. Assume monthly volume of 21,000 units. What is the operating
leverage assuming: (Round your answers to 2 decimal
places.)
1. The unit-rate lease?
2. The flat-rate lease?
d. Assume monthly volume of 21,000 units. What is the margin of
safety percentage assuming: (Round your answers to 1 decimal
place.)
1. The unit-rate lease?
2. The flat-rate lease?