Question: Aunt Kity's Pies is a small bakery that sells its products to local restaurants and supermarkets. The Bakery's most recent income statement is given below:
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Sales
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$78,000
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|
Variable Costs
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$24,960
|
|
Contribution Margin
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$53,040
|
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Fixed costs
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$29,240
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|
Net Income
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$23,800
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[A] Calculate Aunt Kity's Contribution Margin Ratio?
[B] Calculate Aunt Kity's breakeven level of sales revenues?
[C] Calculate Aunt Kity's Margin of Safety in the most recent year?
[D] Suppose that Aunt Kity's is considering investing in new machinery that will reduce variable costs per unit by 10%. In order to achieve the savings, bakery's fixed costs would increase by $6,360. What will happen to the breakeven level of sales revenues?