Karen’s Quilts is considering the purchase of a new Long-arm Quilt Machine that will cost $17,500 and will increase her fixed costs by $119. What would happen if she purchased the new quilt machine to realize the variable cost savings of $5.00 per quilt, and what would happen if she raised her price by just $5.00? She feels confident that such a small price increase will not decrease the sales in units that will help her offset the increase in fixed costs. Given the following current prices how would the break even in units and dollars change? Complete the monthly contribution margin income statement for each of these cases.

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Selling Price, Variable Cost and Fixed Cost Change Analysis With Current With Decreased VC Price and Increased FC Sales price per unit Variable cost per unit Contribution margin per unit Fixed costs Break-even in units Break-even in dollars $ 65.00 15.50 $ 49.50 $ 99.00 Unit sales, expected Sales Variable costs Contribution margin Fixed costs Net income 2 $130.00 Monthly Contribution Margin Income Statement 10 With Increased SP, Decreased VC and Increased FC 10 10