d) Calculate the margin of safety in units and in sales dollars. e) The President of Benoit is under pressure from shareholders to increase operating income by 50% in 2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is this a realistic goal? f) Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholders desired profit level for 2020? Is this a viable option? g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of safety: (i) Increase in sales volume (ii) Increase in total fixed costs (iii) Increase in selling price per unit (iv) Decrease in variable costs per unit
d) Calculate the margin of safety in units and in sales dollars.
e) The President of Benoit is under pressure from shareholders to increase operating income by 50% in
2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute
the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is
this a realistic goal?
f) Assume that as a result of reorganizing the production process, the management of Benoit
Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of
the raw material used in the production process. Variable manufacturing overhead per unit would also
decrease by $3. The business is also considering paying additional annual commission of $36,400 to
its sales team as part of the sales expansion effort, which should result in an increase in sales revenue.
The head of the marketing department has indicated that the effort of the sales team should result in a
5% increase in sales volume. What must the new selling price per unit be if the company wishes to
meet the shareholders desired profit level for 2020? Is this a viable option?
g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of
safety:
(i) Increase in sales volume
(ii) Increase in total fixed costs
(iii) Increase in selling price per unit
(iv) Decrease in variable costs per unit
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