Drake Company produces a single product. Last year's income statement is as follows: Sales (23,000 units) Less: Variable costs $1,384,600 938,400 Contribution margin $ 446,200 Less: Fixed costs 258,500 Operating income S 187,700 Required: 1. Compute the break-even point in a) units and b) 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.) 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 $227,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unchanged. a) Prepare a budgeted income statement assuming Drake makes this investment. (Round all amounts to the nearest dollar.) b) 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.)

Drake Company produces a single product. Last year's income statement is as follows: Sales (23,000 units) Less: Variable costs $1,384,600 938,400 Contribution margin $ 446,200 Less: Fixed costs 258,500 Operating income S 187,700 Required: 1. Compute the break-even point in a) units and b) 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.) 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 $227,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unchanged. a) Prepare a budgeted income statement assuming Drake makes this investment. (Round all amounts to the nearest dollar.) b) 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.)

Name: Drake Company produces a single product. Last year's income statement
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Description: Drake Company produces a single product. Last year's income statement is as follows:Sales (23,000 units)$1,384,600Less: Variable costs938,400Contribution margin$ 446,200Less: Fixed costs258,500Operating income$ 187,700Required:1. Compute the break-e

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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