Calculate the break-even point and safety margin, Managerial Accounting

The Braggs & Struttin' Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.

Sales                                       $1,600,000.

Less: COGS                                1,120,000.

Gross margin:                              $480,000.

Less: Operating expenses              100,000.

Income:                                      $380,000.

Cost of goods sold consists of $810,000 of variable costs and $310,000 of fixed costs. Operating expenses consists of $30,000 of variable costs and $70,000 of fixed costs.


A. Calculate the break-even point in units and sales dollars.

B. Calculate the safety margin (in dollars).

C. Braggs & Struttin' received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order, assuming there is no opportunity costs.          

Posted Date: 2/16/2013 12:20:31 AM | Location : United States

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