Question

Kylie's Cookies is considering the purchase of a larger oven that will cost $2,200 and will increase her fixed costs by $30. What would happen if she purchased the new oven to realize the variable cost savings of $0.10 per cookie, and what would happen if she raised her price by just $0.20? She feels confident that such a small price increase will decrease the sales by only 20 units and may help her offset the increase in fixed costs. Given the following current prices how would the break-even in units and dollars change if she doesn't increase the selling price and if she does increase the selling price? Complete the monthly contribution margin income statement for each of these cases.

Round your answers to two decimal places. Round break-even units to a whole number.

Selling Price, Variable Cost and Fixed Cost Change Analysis
	With Current Price	With Decreased VC and Increased FC	With Increased SP, Decreased VC, and Increased FC
Sales Price per Unit	$1.70	$	$
Variable Cost per Unit	0.40
Contribution Margin per Unit	$1.30	$	$
Fixed Costs	$390	$	$
Break-even in Units	300
Break-even in Dollars	$510	$	$

Monthly Contribution Margin Income Statement
	With Current Price	With Decreased VC and Increased FC	With Increased SP, Decreased VC, and Increased FC
Unit Sales, Expected	800
Sales	$	$	$
Variable Costs
Contribution Margin	$	$	$
Fixed Costs
Net Income	$	$	$

Answer 1

Selling Price, Variable Cost and Fixed Cost Change Analysis
	With Current Price	With Decreased VC and Increased FC	With Increased SP, Decreased VC, and Increased FC
Sales Price per Unit	$1.70	$1.70	$1.9
Variable Cost per Unit	0.40	0.3	0.3
Contribution Margin per Unit	$1.30	$1.4	$1.6
Fixed Costs	$390	$420	$420
Break-even in Units	300	300	263
Break-even in Dollars	$510	$510	$500

Monthly Contribution Margin Income Statement
	With Current Price	With Decreased VC and Increased FC	With Increased SP, Decreased VC, and Increased FC
Unit Sales, Expected	800	800	780
Sales	$1360	$1360	$1482
Variable Costs	320	240	234
Contribution Margin	$1040	$1120	$1248
Fixed Costs	390	420	420
Net Income	$650	$700	$828