2. Cost-Volume-Profit (CVP) Relationships

Bilco Fabrication manufactures one product, a low-cost car battery. Cost analysis by the accounting department has determined that the variable cost per unit is $12. Bilcos fixed costs amount to $792,480 annually. The company is projecting data based on a sales price of $20. Use the above data to answer the following:

* Calculate Bilcos break-even point in number of units.

* Figure the level of sales that Bilco would have to achieve to reach a target income of $150,000. Indicate your answer in dollars of sales.

* What is Bilcos Degree of operating leverage at 125,000 batteries? If sales were to increase by 8%, how much would Net Income increase by (b-% c-$)?

a. _______________ b. _________________ c. _________________

* Indicate the companys margin of safety at a projected level of sales of 125,000 units sold, stated in (a) dollars of sales, and (b) as a percentage of sales and (c) units.

a. _______________ b. _________________ c. _________________