Question - Bell Company manufactures a product that sells for $48 per unit. Variable cost per unit is $30 and total fixed costs $1,800,000 for the current production and sales of 120,000 units.
Required: Complete each of the following requirements with supporting computations.
a) Using the contribution margin ratio, compute the break-even point in dollars.
b) Compute the margin of safety and margin of safety ratio.
c) The marketing department has suggested the price per unit be dropped to $45 and $250,000 per year be spent on an advertising campaign. The marketing group forecasts these changes will result in a 20% increase in sales volume. Should this change be made? Support your answer with computations.