Aubrey Company produces a single product. Last year’s income statement is as follows:

Required:

1. Compute the break-even point in units and sales revenue. (Round break-even units to the nearest unit and revenue to the nearest dollar.)

2. What was the margin of safety for the company last year?

3. Suppose that Aubrey Company is considering an investment in new technology that will increase fixed costs by $60,000 per year, but will lower variable costs to 28 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming the company makes this investment. What is the new break-even point in units, assuming the investment is made?

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Sales (12,000 units) Less: Variable costs Contribution margin Less: Fixed costs Operating income $1,218,000 365,400 $ 852,600 300,000 $ 552,600