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Break-Even in Units and Sales Dollars, Margin of Safety

Break-Even in Units and Sales Dollars, Margin of Safety

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 59P: Cost-Volume-Profit, Margin of Safety Victoria Company produces a single product. Last years income...
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Break-Even in Units and Sales Dollars, Margin of Safety

Drake Company produces a single product. Last year's income statement is as follows:

Break-Even in Units and Sales Dollars, Margin of Safety Drake Company produces a single product. Last year's income statement is as follows: Sales (18,000 units) $1,110,600 Less: Variable costs 725,400 Contribution margin $385,200 Less: Fixed costs 264,200 Operating income $121,000 Required: 1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Rou nearest whole unit or dollar. Break-even units 12,346 V units Break-even dollars 2. What was the margin of safety in dollars for Drake Company last year? Round your final answer to the nearest whole dollar. X 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $237,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unch statement assuming Drake makes this investment. Round all amounts to the nearest dollar. Drake Company Budgeted Income Statement X X $4 X What is the new break-even point in units, assuming the investment is made? In your computations, round the unit contribution margin to the nearest cent. Round your final answer to the nearest whole unit. Y unite
Transcribed Image Text:Break-Even in Units and Sales Dollars, Margin of Safety Drake Company produces a single product. Last year's income statement is as follows: Sales (18,000 units) $1,110,600 Less: Variable costs 725,400 Contribution margin $385,200 Less: Fixed costs 264,200 Operating income $121,000 Required: 1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Rou nearest whole unit or dollar. Break-even units 12,346 V units Break-even dollars 2. What was the margin of safety in dollars for Drake Company last year? Round your final answer to the nearest whole dollar. X 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $237,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unch statement assuming Drake makes this investment. Round all amounts to the nearest dollar. Drake Company Budgeted Income Statement X X $4 X What is the new break-even point in units, assuming the investment is made? In your computations, round the unit contribution margin to the nearest cent. Round your final answer to the nearest whole unit. Y unite
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