Question

Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY CVP Income...

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

Homework Answers

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
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