Taken from Financial & Managerial Accounting (19^th edition) by Williams, Haka, Bettner, and Carcello

EXERCISE 20.11

Applying CVP Concepts

Guthrie Industries manufactures and sells dog collars. The collars sell for $12 each. Information about the company's costs is as follows.

Variable manufacturing cost per unit $2

Variable selling and administrative cost per unit 1

Fixed manufacturing overhead per month $250,000

Fixed selling and administrative cost per month 200,000

a. Determine the company's monthly break-even point in units.

b. Determine the sales volume (in dollars) required for a monthly operating income of $900,000.

c. Compute the company's margin of safety if its current monthly sales level is $1,400,000.

d. Estimate the amount by which monthly operating income will increase if Guthrie anticipates a $60,000 increase in monthly sales volume.