6.4.5.8

Break-even sales and sales to realize operating income

For the current year ended March 31, Cosgrove Company expects fixed costs of $557,200, a unit variable cost of $56, and a unit selling price of $84.

a. Compute the anticipated break-even sales (units) ____

b. Compute the sales (units) required to realize operating income of $128,800 _____

Break-Even Sales

Currently, the unit selling price of a product is $260, the unit variable cost is $210, and the total fixed costs are $720,000. A proposal is being evaluated to increase the unit selling price to $290.

a. Compute the current break-even sales _____ units

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant ____units

Margin of Safety

a. If Canace Company, with a break-even point at $616,200 of sales, has actual sales of $790,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number.

1. $___

2. ____%

b. If the margin of safety for Canace Company was 25%, fixed costs were $1,625,625, and variable costs were 75% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break-even in sales dollars first.) ________