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.
Less: COGS 1,120,000.
Gross margin: $480,000.
Less: Operating expenses 100,000.
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.