Kyonggi Machine Corporation in Suwon reports the following operating results for the month of June in 2020. KYONGGI MACHINE CORPORATION CVP Income Statement For the Month Ended June 30, 2020 (Currency Unit: Korean Won, ₩) Total Per Unit Sales (5,000 units) ₩300,000,000 ₩60,000 Variable costs 180,000,000 36,000 Contribution margin 120,000,000 ₩24,000 Fixed expenses 100,000,000 Net income ₩ 20,000,000 To increase net income, management is considering reducing the selling price by 10%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 25%.

Kyonggi Machine Corporation in Suwon reports the following operating results for the month of June in 2020. KYONGGI MACHINE CORPORATION CVP Income Statement For the Month Ended June 30, 2020 (Currency Unit: Korean Won, ₩) Total Per Unit Sales (5,000 units) ₩300,000,000 ₩60,000 Variable costs 180,000,000 36,000 Contribution margin 120,000,000 ₩24,000 Fixed expenses 100,000,000 Net income ₩ 20,000,000 To increase net income, management is considering reducing the selling price by 10%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 25%.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter5: Sales And Receivables

Section: Chapter Questions

Problem 57BE

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Question

Kyonggi Machine Corporation in Suwon reports the following operating results for the month of June in 2020.

KYONGGI MACHINE CORPORATION

CVP Income Statement

For the Month Ended June 30, 2020

(Currency Unit: Korean Won, ₩)

Total Per Unit

Sales (5,000 units) ₩300,000,000 ₩60,000

Variable costs 180,000,000 36,000

Contribution margin 120,000,000 ₩24,000

Fixed expenses 100,000,000

Net income ₩ 20,000,000

To increase net income, management is considering reducing the selling price by 10%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 25%.

(Instructions)

Compute the break-even point in units and monetary amount:

(a) Assuming no changes to sales price or costs

(b) Assuming changes to sales price and volume as described above.

Comment on your findings.

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