PRICING DECISIONS

Accurate Accounting provides accounting services at an average price of $110 per hour and incurs variable costs of $60 per hour. Assume average fixed costs are $7,200 a month. (Round your answer to the nearest whole unit.)

1. What is the number of hours that must be billed to reach the breakeven point?
2. If the company desires to make a profit of $3,600, how many hours must be completed?
3. The company thinks it can reduce fixed costs to $6,800, but variable cost will increase to $64 per hour. The price per unit will not change. What is the new breakeven point in hours?

Thrills Amusement Park provides a variety of attractions. Thrills sells tickets at $50 per person as a one-day entrance fee. Variable costs are $28 per person, and fixed costs are $178,800 per month. Assume that Thrills reduces fixed costs from $178,800 per month to $166,500 per month.

1. Compute the new breakeven point in tickets and in sales dollars.

Smith Plumbing makes a deluxe sink faucet. The company is currently producing and selling 100 faucets per month. Data are as follows:

Sales price per unit	$400
Variable cost per unit	$235
Fixed costs per month	$5,115

1. What is the margin of safety in units?

2. What is the margin of safety in sales dollars?