Question 5 (11 marks)

Stylo Company produces a single product. Their most recent data is shown below:

Current

Units sold 1 450

Sales price per unit $ 100

Variable cost per unit $ 50

Fixed costs $20 500

Required:

Calculate the current breakeven point in units and dollars. (3 marks)

ANSWER a:

Prepare a contribution margin income statement showing the company's profitability performance. (2 marks)

ANSWER b:

They have recently received the result of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. The company can also source a cheaper raw material, decreasing the unit raw material cost by 8%. Demonstrate how these changes will benefit the company. (4 marks)

ANSWER c:

What is the margin of safety in dollars, assuming projected sales are based on the new retail price. (2 marks)

ANSWER d: