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Question - Preppy Co. makes and sells a single product. The current selling price is $47 per unit. Variable costs are $21 per unit and fixed expenses total $105,000 per month. Sales volume for July totaled 11,500 units.
(a) Calculate the operating income for July. Use the Contribution Margin Format.
(b) Calculate the break-even point in units sold and break-even total revenues.
(c) Management is considering the use of automated production equipment. If this were done, variable costs would increase by $3.00 per unit, but fixed expenses would decrease by $15,000 per month.
(1) Using the new cost structure, calculate operating income at a volume of 12,000 units per month. Use the Contribution Margin Format.
(2) Using the new cost structure, calculate the break-even point in units sold and break-even total revenues.
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