riefly explain the impact of each of the following scenarios on the contribution margin per unit and the break-even point:
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round.
The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower
limits of activity for the year ended December 31, 2020.
Lower Limit Upper Limit
Production (# of boxes) 4,000 6,000
Production Costs:
Direct Materials …………………… $60,000 $90,000
Direct Labour ………………………. 80,000 120,000
Overhead:
Indirect Materials…………... 25,000 37,500
Indirect Labour ……………. 40,000 50,000
Selling & Administrative Expenses:
Sales Salaries ……………………… 50,000 65,000
Office Salaries ……………………… 30,000 30,000
Advertising ………………………….. 45,000 45,000
Other …………………………………………. __15,000 __20,000
Total $365,000 $477,500
g) Briefly explain the impact of each of the following scenarios on the contribution margin per unit and the
break-even point:
(i) Sales volume increases
(ii) Total fixed cost decreases
(iii) Selling price per unit increases
(iv) Variable cost per unit increases
Step by step
Solved in 3 steps