Question

Do It! Review 6-1 a, bi 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 Per Unit Sales (8,000 units) $440,000 $55 Variable costs 242,000 30.25 Contribution margin 198,000 $24.75 Fixed expenses 195,426 Net income $2,574 Management is considering the following course of action to increase net income: Reduce the selling price by 3%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 10%. Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars: (Round intermediate calculations to 4 decimal places e.g. 0.2522 and final answer to 0 decimal places, e.g. 2,510.) (a) Assuming no changes to selling price or costs. Break-even point 7896 units Break-even point $ 434280 Margin of safety $ 5720 (61) Assuming changes to sales price and volume as described above. Break-even point 8460 units Break-even point $ 454479 Margin of safety $ -27679

Answer 1

Data				After
Particulars			Current	Change
Sales	(in units)		8000	8800
Selling Price per unit			$            55.00	$            53.35
Sales			$ 4,40,000.00	$ 4,69,480.00
Variable cost per unit			$            30.25	$            30.25
Variable cost			$ 2,42,000.00	$ 2,66,200.00
Contribution Margin			$ 1,98,000.00	$ 2,03,280.00
Contribution Margin per unit			$            24.75	$            23.10
Contribution Margin ratio			0.45	0.432989691
Fixed Cost			$ 1,95,426.00	$ 1,95,426.00

b1)	Break even point		=	Fixed cost / Contribution margin per unit
	(in units)		=	$ 195426 / $ 23.10
			=	8460	units
	Break even point		=	Fixed cost / Contribution margin %
	(in dollars)		=	$ 195426 / 0.4330
			=	$      4,51,330
	Margin of safety		=	Actual sales - Break even sales
			=	$ 469480 - $ 451330
			=	$    18,150.00

Note: Part (a) is all correct. If you find any mistake in part (b1), please let me know. Thank you