Changes in Break-Even Points with Changes in Unit Prices

Cassius produces and sells novelty items for resort gift shops. Last year, Cassius sold 99,200 units. The income statement for Cassius, Inc., for last year is as follows:

Sales	$992,000
Less: Variable expenses	545,600
Contribution margin	$446,400
Less: Fixed expenses	180,000
Operating income	$266,400

Required:

1. Compute the break-even point in units and in revenues.

Break-even units	fill in the blank 1
Break-even revenue	$fill in the blank 2

Compute the margin of safety in sales revenue for last year. $fill in the blank 3

2. Suppose that the selling price increases by 6 percent. Will the break-even point increase or decrease?

IncreaseDecreaseDecrease

Recompute the break-even point in units. Round your answer to the nearest whole unit. fill in the blank 5 units

3. Suppose that the variable cost per unit increases by $0.20. Will the break-even point increase or decrease?

IncreaseDecreaseIncrease

Recompute the break-even point in units. Round your answer to the nearest whole unit. fill in the blank 7 units

4. Can you predict whether the break-even point increases or decreases if both the selling price and the unit variable cost increase?

Yes - it will increaseYes - it will decreaseNo - it could increase or decreaseNo - it could increase or decrease

Recompute the break-even point in units incorporating both of the changes in Requirements 2 and 3. Round your answer to the nearest whole unit. fill in the blank 9 units

5. Assume that total fixed costs decrease by $12,000. (Assume no other changes from the original data.) Will the break-even point increase or decrease?

IncreaseDecreaseDecrease

Recompute the break-even point in units. Round your answer to the nearest whole unit. fill in the blank 11 units