Belmont produces and sells plastic storage containers. Last year, Belmont sold 125,000 units. The income statement for Belmont, Inc., for last year is as follows:

Required:
1. Compute the break-even point in units and in revenues. Compute the margin of safety for last year.
2. Suppose that the selling price increases by 10 percent. Will the break-even point increase or decrease? Recompute it.
3. Suppose that the variable cost per unit increases by \($0.35\). Will the break-even point increase or decrease? Recompute it.
4. Can you predict whether the break-even point increases or decreases if both the selling price and the unit variable cost increase? Recompute the break-even point incorporating both of the changes in Requirements 1 and 2.
5. Assume that total fixed costs increase by \($50,000\). (Assume no other changes from the original data.) Will the break-even point increase or decrease? Recompute it.

Transcribed Image Text:

Sales Less: Variable expenses Contribution margin Less: Fixed expenses Operating income $625,000 343,750 $281,250 180,000 $101,250