Carla Vista Manufacturing Ltd. has provided you with the following CVP income statement:

Sales (5,200 units)		$1,040,000		$200	per unit
Variable costs		686,400		132	per unit
Contribution margin		353,600		$68	per unit
Fixed costs		290,360
Operating income		$63,240

Management is considering the following course of action to increase operating income: reduce the selling price by 20%, with no changes to unit variable costs or fixed costs. Management feels that this change will increase unit sales by 30%.

Calculate the break-even point in units and sales dollars with no change in sales. (Round contribution margin ratio to 5 decimal places, e.g. 15.22456%. Round units to 0 decimal places, e.g. 5,275 and dollar amount to 2 decimal places, e.g. 15.25.)

		In units		In dollars
Break-even point		enter a number of units rounded to 0 decimal places		$enter a dollar amount rounded to 2 decimal places

Question Part Score

--/2

Calculate the break-even point in units and sales dollars with the proposed change in sales price. (Round units to 0 decimal places, e.g. 5,275 and dollar amount to 2 decimal places, e.g. 15.25.)

		In units		In dollars
Break-even point		enter a number of units rounded to 0 decimal places		$enter a dollar amount rounded to 2 decimal places

Question Part Score

--/4

Should management go forward with the reduction in sales price? select an option YesNo