Break-Even in Units and Sales Dollars, Margin of Safety
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...
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Break-Even in Units and Sales Dollars, Margin of Safety
Drake Company produces a single product. Last year's income statement is as follows:
![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 (18,000 units)
$1,110,600
Less: Variable costs
725,400
Contribution margin
$385,200
Less: Fixed costs
264,200
Operating income
$121,000
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. Rou
nearest whole unit or dollar.
Break-even units
12,346 V 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.
X
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $237,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unch
statement assuming Drake makes this investment. Round all amounts to the nearest dollar.
Drake Company
Budgeted Income Statement
X
X
$4
X
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.
Y unite](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff73127b8-583e-418e-ad77-88f973b6d181%2Fd31e8073-195a-4114-bc6d-d5973cfd1a1a%2Fe9378ze_processed.png&w=3840&q=75)
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 (18,000 units)
$1,110,600
Less: Variable costs
725,400
Contribution margin
$385,200
Less: Fixed costs
264,200
Operating income
$121,000
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. Rou
nearest whole unit or dollar.
Break-even units
12,346 V 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.
X
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $237,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unch
statement assuming Drake makes this investment. Round all amounts to the nearest dollar.
Drake Company
Budgeted Income Statement
X
X
$4
X
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.
Y unite
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