Victoria Company reports the following operating results for the month of April. Compute the break-even point and margin of safety under different alternatives.

Victoria Company CVP Income Statement For the Month Ended April 30, 2020

                                    Total           Per Unit

Sales (9,000 units)    $450,000        $50

Variable costs           $270,000         $30

Contribution margin $180,000       $20

Fixed expenses          $150,000

Net income                $130,000

Management is considering the following course of action to increase net income: 

Reduce the selling price by 4%, with no changes to unit variable costs or fixed costs. 

Management is confident that this change will increase unit sales by 20%. 

Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars:

a. Assuming no changes to selling price or costs, and
b. Assuming changes to sales price and volume as described above.
Comment on your findings.

Answer rating: 100% (QA)

a BreakEven Point Current Situation The breakeven point is the level of sales at which the companys total contribution margin equals its fixed expense... View the full answer