Poppins Corporation has the following information available:

• Current Sales: 5,000 units @$15 per unit
• Variable Costs Per Unit: $8.00
• Fixed Costs: $20,000

Poppins is looking at lowering the price and also lowering the variable cost per unit (buying cheaper products).

• New Selling Price: $12 per unit
• New Variable Cost Per unit: $7.00
• New Estimated Units Sold: 6,500

Required:

Calculate the net income, breakeven point in units and units needed for a net income of $20,000 using the current information and also with the changes. Also write a summary with a recommendation as to whether or not Poppins should make the changes. Support your answer with numbers from your statements.

	Current	With Changes
Sales
Variable Costs
Contribution Margin
Fixed Costs
Net Income
Units to Break-Even
Units for Target Net Income

Analysis