Question
Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY CVP Income Statement For the Month Ended April 30, 2020 Total
Victoria Company reports the following operating results for the month of April.
| VICTORIA COMPANY CVP Income Statement For the Month Ended April 30, 2020 | ||||
| Total | Per Unit | |||
| Sales (9,000 units) | $450,000 | $50 | ||
| Variable costs | 270,000 | 30 | ||
| Contribution margin | 180,000 | $20 | ||
| Fixed expenses | 150,000 | |||
| Net income | $30,000 | |||
Management is considering the following course of action to increase net income: Reduce the selling price by 4%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 20%. Assuming no changes to selling price or costs.
| Break-even point in units | = | 7,500 | units |
| Break-even point in sales dollars | = | $375,000 | |
| The margin of safety in dollars | = | $75,000 |
Assuming changes to sales price and volume as described above.
| Break-even point in units | = | 8,333 | units |
| Break-even point in sales dollars | = | $400,000 | |
| The margin of safety in dollars | = | $118,400 |
(b2) Comment on the proposed course of action for computations.
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Managerial Accounting
Authors: James Jiambalvo
4th edition
9780470546888, 9780470333341, 470546883, 470333340, 978-0470578797
