Question
Break-Even in Units and Sales Dollars, Margin of Safety Drake Company produces a single product. Last year's income statement is as follows: Sales (21,000 units)
Break-Even in Units and Sales Dollars, Margin of Safety Drake Company produces a single product. Last year's income statement is as follows: Sales (21,000 units) $1,260,000 Less: Variable costs 850,500 Contribution margin $409,500 Less: Fixed costs 259,600 Operating income $149,900
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $248,900 per year, but will lower variable costs to 40 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar.
Drake Company | |
Budgeted Income Statement | |
Sales | $ |
Less: Variable costs | |
Contribution margin | $ |
Less: Fixed costs | |
Net income
| $ 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. |
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