6 Cost-volume-profit analysis and standard costs

The Cotton Bear Clothing Company has to decide whether to produce boys' trousers or girls' skirts. Market research conducted for the company shows that the demand for boys' trousers is 200 per month at a selling price of $95 each and that the demand for girls' skirts is 100 per month at $120 each. Cost information involving either the production of boys' trousers or girls' skirts is shown on the following page. Required

a Advise the management of Cotton Bear Clothing Company whether it is more profitable to produce boys' trousers or girls' skirts by calculating the following:

i the break-even points in units and sales dollars for each product

ii the level of profits or losses if either product was made, assuming the market research demand figures for sales volume and selling prices

iii the margin of safety percentage for each product using the market research demand figures as predicted sales volumes for the month.