Victoria Company produces a single product Last year s income statement
Victoria Company produces a single product. Last year’s income statement is as follows:
Sales (29,000 units) ........... $1,218,000
Total variable cost ............. 812,000
Contribution margin ............ $ 406,000
Total fixed cost ............. 300,000
Operating income ............ $ 106,000

Required:
1. Compute the break-even point in units and sales dollars.
2. What was the margin of safety for Victoria last year?
3. Suppose that Victoria is considering an investment in new technology that will increase fixed cost by $250,000 per year but will lower variable costs to 45 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming that Victoria makes this investment. What is the new break-even point in units and sales dollars, assuming that the investment is made?
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