P20-48 Computing breakeven sales and sales needed to earn a target profit; performing sensitivity analysis This problem continues the Piedmont Computer Company situation from Chapter 19. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Average fixed costs per month are $156,000. Requirements 1. What is the number of units that must be sold each month to reach the breakeven point? 2. If the company currently sells 945 units per month, what is the margin of safety in units and dollars? 3. If Piedmont Computer Company desires to make a profit of $15,000 per month, how many units must be sold? 4. Piedmont Computer Company thinks it can restructure some costs so that fixed costs will be reduced to $90,000 per month, but the weighted average variable cost per unit will increase to $525 per unit. What is the new breakeven point in units? Does this increase or decrease the margin of safety? Why or why not? Solution: Requirement 1 Required sales in units 156000 300 520 Requirement 2 Margin of Safety in Units Margin of Safety in dollars 425 318750 Requirement 3 Required sales in units 171000 300 570 Requirement 4 Required sales in units Expected sales in units