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Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY CVP Income Statement For the Month Ended April 30, 2020 Total Per Unit Sales (10,000 units) $460,000 $46 Variable costs 230,000 23.00 Contribution margin 230,000 $23.00 Fixed expenses 179,400 Net income $50,600 Management is considering the following course of action to increase net income: Reduce the selling price by 10%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 10%. Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars: (Round intermediate calculations to 4 decimal places e.g. 0.2522 and final answer to 0 decimal places, e.g. 2,510.)

Respuesta :

TomShelby

Answer:

The current values for BEp and margin of safety before the proposed changes are:

BEP units: 7,800

in dollars: $ 358,800

Margin of safety:

2,200 units or $ 101,200 of sales

Explanation:

The break even pont is the level of salesthat makes the operating income equal to zero. the margin of safety is the amount above this level at curernt sales.

[tex]Sales \: Revenue - Variable \: Cost = Contribution \: Margin[/tex]

Contribution per unit: $23

Fixed Cost $179,400

[tex]\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}[/tex]

179,400 / 23 = 7,800

In dollars: 7,800 units x $46 each = $ 358,800

Margin of safety:

10,000 - 7,800 = 2,200

in dollars 460,000 - 358,800 = 101,200

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