Question
Penny's Portraits offers only one product/service which is painted portraits. Each portrait is sold at a price of $95 each. In 2021, Penny's Portraits had
Penny's Portraits offers only one product/service which is painted portraits. Each portrait is sold at a price of $95 each. In 2021, Penny's Portraits had revenues of $95,000 and fixed expenses of $30,000. On average the variable costs of making one portrait is $45 per portrait made/sold. For 2022, Penny is expecting to sell the same number of portraits as 2021 but will increase the sale price to $100 each. Variable costs are expected to remain the same but fixed costs will increase by 30%. How does Penny's break even point, and margin of safety compare between the two years? Is there any business advice you would like to give her?
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