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Group Problem 3 One of the products produced by Broward Packing is Citrus Delight. The selling price per half-gallon is $4.50
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Answer #1

Part-a

Computation of BEP Unit
Contribution per Unit= Selling Price Per Unit- Variable cost per Unit
$4.50-$2.70= $1.80 per Unit
BEP= Fixed Cost/ Contribution per Unit
316000/1.80= 175556 Unit

Part-b

Computation of margin of Safety Unit
Margin of Safety Unit = Total Sales - BEP Sales Unit
200000-175556= 24444 Unit

Part-c

Computation of DOL
DOL= Contribution / Net Income
=360000/44000=8.18 times
* Contribution = $1.80X 200000= $360000
Net Income = $360000-316000= $44000

Part-d

DOL= 8.18 times
Increase in sales by 30%
Increase in net income by 8.18*30%=245%

Part-e

If Fixed Cost increased by $41200, Revised Fixed Cost will be = 316000+41200=$357200
CM per Unit= $1.80 per unit
Revised BEP= 357200/1.80=198444 unit
Computation of DOL
DOL= Contribution / Net Income
=414000/56800=7.29 times
* Contribution = $1.80X (200000*1.15)= $414000
Net Income = $414000-357200= $56800
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