Question

Bando Corp. sells a single part for a price of $46 per unit. The variable costs of the part are $19 per unit and monthly fixed costs are $143,100. Required: a. What is the break-even level of monthly sales for Bando? b. The cost analyst tells you that based on the price and cost information of the part and the marketing department's sales projection for next month, the margin of safety percentage is 20 percent. How many units does marketing expect to sell next month? Complete this question by entering your answers in the tabs below. Required A Required B What is the break-even level of monthly sales for Bando? Break-even level parts Required A Required B >

Answer 1

A.	Break - even level	=	5,300	parts
B.	Projected sales	=	6,625	parts
	Workings:
	Unit selling Price	=	$                           46
	Unit variable cost	=	$                           19
	Unit contribution margin	=	$                           27
	Break-even point in units	=	Fixed costs / Unit contribution margin
		=	($143100) / $27
		=	5,300	parts
	Margin of safety	=	(Projected sales - Break even point) / Projected sales
	Let Projected sales be X
	20%	=	(X - 5300) / X
	0.2 X	=	X - 5300
	0.8 X	=	5300
	X	=	6625	parts
	Therefore,
	Projected units to be sell next month is 6625 parts