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1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Round your final answers to the nearest whole unit or dollar. Break-even units units Break-even dollars 2. What was the margin of safety in dollars for Drake Company last year? Round your final answer to the nearest whole dollar. 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $208,700 per year, but will lower variable costs to 46 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar.

1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Round your final answers to the nearest whole unit or dollar. Break-even units units Break-even dollars 2. What was the margin of safety in dollars for Drake Company last year? Round your final answer to the nearest whole dollar. 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $208,700 per year, but will lower variable costs to 46 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Drake Company

Break-Even in Units and Sales Dollars, Margin of Safety Drake Company produces a single product. Last year's income statement is as follows: Sales (22,000 units) $1,348,600 Less: Variable costs 908,600 Contribution margin $440,000 Less: Fixed costs 275,300 Operating income $164,700 Required: 1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Round your final answers to the nearest whole unit or dollar. Break-even units units Break-even dollars 2. What was the margin of safety in dollars for Drake Company last year? Round your final answer to the nearest whole dollar. 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $208,700 per year, but will lower variable costs to 46 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar.
Transcribed Image Text:Break-Even in Units and Sales Dollars, Margin of Safety Drake Company produces a single product. Last year's income statement is as follows: Sales (22,000 units) $1,348,600 Less: Variable costs 908,600 Contribution margin $440,000 Less: Fixed costs 275,300 Operating income $164,700 Required: 1. Compute the break-even point in units and sales revenue. In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Round your final answers to the nearest whole unit or dollar. Break-even units units Break-even dollars 2. What was the margin of safety in dollars for Drake Company last year? Round your final answer to the nearest whole dollar. 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $208,700 per year, but will lower variable costs to 46 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar.
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $208,700 per year, but will lower variable costs to 46 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar. Drake Company Budgeted Income Statement Sales Less: Variable costs Contribution margin Less: Fixed costs Net income What is the new break-even point in units, assuming the investment is made? In your computations, round the unit contribution margin to the nearest cent. Round your final answer to the nearest whole unit. units
Transcribed Image Text:3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $208,700 per year, but will lower variable costs to 46 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. Round all amounts to the nearest dollar. Drake Company Budgeted Income Statement Sales Less: Variable costs Contribution margin Less: Fixed costs Net income What is the new break-even point in units, assuming the investment is made? In your computations, round the unit contribution margin to the nearest cent. Round your final answer to the nearest whole unit. units
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