Question

WileyPLUS Problem 6.6 a-c Iris Manufacturing Inc. has provided you with the following CVP Income statement Sales (5,200 units) Variable costs Contribution margin Fixed costs Operating income $1,040,000 606,400 353,600 290,360 $63,240 $200 per unit 132 per unit $68 per unit Management is considering the following course of action to increase operating Income reduce the selling price by 204, with no changes to unit variable costs or fixed costs. Management feels that this change will increase unit sales by 30%. Calculate the break-even point in units and sales dollars with no change in sales. (Round units to o decimal places, e.g. 5,275 and dollar amount to 2 decimal places, e.g. 15.25.) In units in dollars Break-even point LINK TO TEXT Calculate the break-even point in units and sales dollars with the proposed change in sales price. (Round units to o decimal places, e.g. 5,275 and dollar amount to 2 decimal places, e.g. 15.25.) In units In dollars Break-even point LINK TO TEXT

Answer 1

Solution 1:

Break even point in units = Fixed costs / CM per unit = $290,360 / $68 = 4270 units

Breakeven point in dollars = Break even units * Selling price per unit = 4270*$200 = $854,000

Solution 2:

New selling price per unit = $200*80% = $160

New contribution margin per unit = $160 - $132 = $28 per unit

Break even point in units = Fixed costs / CM per unit = $290,360 / $28 = 10370 units

Breakeven point in dollars = Break even units * Selling price per unit = 10370*$160 = $1,659,200