Question

CALCULATOR PRINTER VERSION « « BACK N Do I Review 6-1 a, b1 Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY CVP Income Statement For the Month Ended April 30, 2020 Total Sales (9,000 units) $540,000 Variable costs 270,000 Contribution margin 270,000 Fixed genes 231,000 Net Income $39,000 Per Unit $60 30.00 $30.00 Management is considering the following course of action to increase net income: Reduce the seling price by 10%, with no changes to unit variable costs or fixed costs Management is confident that this change will increase unit sales by 20% Using the contribution margin technique, compute the break-even point in unts and dollars and margin of safety in dollar: (Round Intermediate calculations to é decimal places a 3. 0.2522 and final answer to decimal places,... 2,510.) (a) Assuming no charges to selling price or costs. Break-even point units Break-even point 1 Margin of safety $ (11) Auming changes to ales price and womes described above

Answer 1

Victoria company

a) Break even point = Fixed cost / contribution margin per unit

= 231,000/30 = 7,700 units

Break even sales = Break even point × selling price

= 7,700 × 60 = $ 462,000

Margin of safety = total sales - break even sales

= 540,000 - 462,000 = $ 78,000

b) Break even point = $ 231,000 / (60-6-30) = 9,625 units

Break even sales = 9,625 units × (60-6) = $ 519,750

Margin of safety = {(540,000/60)×1.2} units × 54 - 519,750

= 583,200 - 519,750 = $ 63,450