C-V-P Analysis Mower Manufacturing’s income statement for January 2009 is given below.

1. Calculate the company’s break-even point in sales dollars and units.
2. The company is contemplating the purchase of new production equipment that would reduce variable costs per unit to $16.25. However, fixed costs would increase to $175,000 per month. Assuming sales of 26,000 units next month, prepare an income statement for both the current and the proposed production methods. Calculate the break-even point (in dollars and units) for the new production method.
3. Comment on the difference (if any) in the break-even point for the new production method. What explains the difference in income at sales of 26,000 units between the two production methods?

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Sales (25,000 units x $25) Less variable costs Contribution margin Less fixed costs Profit $625,000 468,750 $156,250 125,000 $ 31,250