Question Content Area 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 (25,000 units)$1,547,500 Less: Variable costs1,005,000 Contribution margin$542,500 Less: Fixed costs296,300 Operating income$246,200 Required: Question Content Area 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: 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. Question Content Area 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $206,500 per year, but will lower variable costs to 42 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 $Sales 1,547,500 Less: Variable costs Less: Variable costs Contribution margin $Contribution margin Less: Fixed costs Less: Fixed costs Net income $Net income Question Content Area 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.
Question Content Area
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 (25,000 units)$1,547,500
Less: Variable costs1,005,000
Contribution margin$542,500
Less: Fixed costs296,300
Operating income$246,200
Required:
Question Content Area
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:
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.
Question Content Area
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $206,500 per year, but will lower variable costs to 42 percent of sales. Units sold will remain unchanged. Prepare a
Drake Company
Budgeted Income Statement
Sales
$Sales
1,547,500
Less: Variable costs
Less: Variable costs
Contribution margin
$Contribution margin
Less: Fixed costs
Less: Fixed costs
Net income
$Net income
Question Content Area
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.
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