Computing breakeven sales and sales needed to earn a target profit; performing sensitivity analysisThis problem continues the Piedmont Computer Company situation from Chapter 19. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Average fixed costs per month are $156,000.RequirementsWhat is the number of units that must be sold each month to reach the breakeven point?If the company currently sells 945 units per month, what is the margin of safety in units and dollars?If Piedmont Computer Company desires to make a profit of $15,000 per month, how many units must be sold?Piedmont Computer Company thinks it can restructure some costs so that fixed costs will be reduced to $90,000 per month, but the Weighted-average variable cost per unit will increase to $525 per unit. What is the new breakeven point in units? Does this increase or decrease the margin of safety? Why or why not?

Since the student has posted multiple requirements, we shall answer the first three alone alone.

Answered: Computing breakeven sales and sales…

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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Computing breakeven sales and sales needed to earn a target profit; performing sensitivity analysis

This problem continues the Piedmont Computer Company situation from Chapter 19. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Average fixed costs per month are $156,000.

Requirements

What is the number of units that must be sold each month to reach the breakeven point?
If the company currently sells 945 units per month, what is the margin of safety in units and dollars?
If Piedmont Computer Company desires to make a profit of $15,000 per month, how many units must be sold?
Piedmont Computer Company thinks it can restructure some costs so that fixed costs will be reduced to $90,000 per month, but the Weighted-average variable cost per unit will increase to $525 per unit. What is the new breakeven point in units? Does this increase or decrease the margin of safety? Why or why not?

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