Victoria Company reports the following operating results for the month of April. Compute the break-even point and
Question:
Victoria Company reports the following operating results for the month of April. Compute the break-even point and margin of safety under different alternatives.
Victoria Company CVP Income Statement For the Month Ended April 30, 2020
Total Per Unit
Sales (9,000 units) $450,000 $50
Variable costs $270,000 $30
Contribution margin $180,000 $20
Fixed expenses $150,000
Net income $130,000
Management is considering the following course of action to increase net income:
Reduce the selling price by 4%, 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 units and dollars and margin of safety in dollars:
a. Assuming no changes to selling price or costs, and
b. Assuming changes to sales price and volume as described above.
Comment on your findings.
Financial and Managerial Accounting
ISBN: 978-1118334263
2nd edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso