Victoria Company reports the following operating results for the month of April.

VICTORIA COMPANY
CVP Income Statement
For the Month Ended April 30, 2017

Total

Per Unit

Sales (8,600 units) $455,800 $53
Variable costs 223,342 25.97
Contribution margin 232,458 $27.03
Fixed expenses 205,428
Net income $27,030

Management is considering the following course of action to increase net income: Reduce the selling price by 5%, 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: (Round intermediate calculations to 4 decimal places e. g. 0.2522 and final answer to 0 decimal places, e. g. 2,510.)

(a) Assuming no changes to selling price or costs.

Break-even point
Victoria Company reports the following operating r

units
Break-even point
$Victoria Company reports the following operating r

Margin of safety
$Victoria Company reports the following operating r

(b1) Assuming changes to sales price and volume as described above.

Break-even point
Victoria Company reports the following operating r

units
Break-even point
$Victoria Company reports the following operating r

Margin of safety
$Victoria Company reports the following operating r

Current sales level:

Breakeven in units 7600 units

Breakeven $ $402,800

Margin of safety is $53,000

When changes occured:

Breakeven in units  8,426  units

Breakeven $ $424,249

Margin of safety is $95,363

Explanation:

Breakeven in units=fixed expenses/contribution margin per unit

Fixed expenses is $205,428

contribution margin per unit is $27.03

breakeven in units=$205,428/$27.03=7600 units

Breakeven in $=breakeven in units *selling price per unit

                        =7600*$53=$402,800

Margin of safety=Actual sales-breakeven in units

                          =8600-7600=1000

margin safety in $=$53*1000=$53,000

If the changes are considered,the revised figures are computed thus:

Reduced selling price=$53*(1-5%)=$50.35

increased sales units=8600*(1+20%)=10,320 units

Breakeven in units=fixed expenses/contribution margin per unit

Fixed expenses is $205,428

contribution margin per unit is =$50.35-$25.97=$24.38

breakeven in units=$205,428/$24.38 = 8,426  units

Breakeven in $=breakeven in units *selling price per unit

                        = 8,426*$50.35=$424,249  

Margin of safety=Actual sales-breakeven in units

                          =10,320-8,426=1894  units

margin safety in $=$50.35*1894 =$95,362.9

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

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