Break-Even in Units and Sales Dollars, Margin of Safety

Aubrey Company produces a single product. Last year's income statement is as follows:

Sales (20,000 units)	$1,202,000
Less: Variable costs	816,000
Contribution margin	$386,000
Less: Fixed costs	290,600
Operating income	$95,400

Required:

Question Content Area

1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Round your final answers to the nearest whole unit or dollar.

Break-even units	fill in the blank 17446b00b06605a_1	units
Break-even dollars	$fill in the blank 17446b00b06605a_2

2. What was the margin of safety in dollars for the Company last year? Round your final answer to the nearest whole dollar. $fill in the blank 17446b00b06605a_3

Feedback Area

Feedback

1. Calculate unit contribution margin. Use that to determine break-even in units. Use break-even units and multiply by price per unit to determine break-even dollars.

2. The margin of safety in sales revenue is the revenue earned or expected to be earned above break-even in sales dollars.

Question Content Area

3. Suppose that Aubrey Company is considering an investment in new technology that will increase fixed costs by $200,900 per year, but will lower variable costs to 42 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming the company makes this investment. Round all amounts to the nearest dollar.

Contribution marginFixed costsSalesVariable costsSales	$Sales
Less: Contribution marginLess: Fixed costsLess: SalesLess: Variable costsLess: Variable costs	Less: Variable costs
Contribution marginFixed costsSalesVariable costsContribution margin	$Contribution margin
Less: Contribution marginLess: Fixed costsLess: SalesLess: Variable costsLess: Fixed costs	Less: Fixed costs
Contribution marginFixed costsOperating incomeOperating lossOperating income	$Operating income

Feedback Area

Feedback

Recalculate using new information.

Question Content Area

What is the new break-even point in units, assuming the investment is made? In your computations, round the unit contribution margin to the nearest cent. Round your final answer to the nearest whole unit. fill in the blank fa365d01201af9a_1 units

Feedback Area

Feedback

Incorrect

Feedback Area

Feedback

Partially correct