Question

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 (9,000 units)		$450,000		$50
Variable costs		225,000		25.00
Contribution margin		225,000		$25.00
Fixed expenses		184,950
Net income		$40,050

Management is considering the following course of action to increase net income: Reduce the selling price by 5%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 20%.

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.)

(a) Assuming no changes to selling price or costs.

Break-even point		Enter a number of units	units
Break-even point		$Enter a dollar amount
Margin of safety		$Enter a dollar amount

(b1) Assuming changes to sales price and volume as described above.

Break-even point		Enter a number of units	units
Break-even point		$Enter a dollar amount
Margin of safety		$Enter a dollar amount

Answer 1

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.)

(a) Assuming no changes to selling price or costs.

Break-even point	184950/25	7398	units
Break-even point	7398*50	369900
Margin of safety	450000-369900	80100

(b1) Assuming changes to sales price and volume as described above.

Break-even point	184950/22.50	8220	units
Break-even point	8220*47.5	390450
Margin of safety	513000-390450	122550