Question
Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $8.12 per string. The variable costs per string are
Comer Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $8.12 per string. The variable costs per string are as follows:
Direct materials $1.87 Direct labor 1.70 Variable factory overhead 0.57 Variable selling expense 0.42
Fixed manufacturing cost totals $245,650 per year. Administrative cost (all fixed) totals $297,606. Comer expects to sell 225,000 strings of lights next year.
Required------ (Answer Below & Show Equations Step by Step)
1. Calculate the break-even point in units.
2. Calculate the margin of safety in units.
3. Calculate the margin of safety in dollars.
4. CONCEPTUAL CONNECTION: Suppose Comer actually experiences a price decrease next year, while all other costs and the number of units sold remain the same. Would this increase or decrease risk for the company? (Hint: Consider what would happen to the number of break-even units and to the margin of safety.)
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