Queensland Company reports the following operating results for the month of April.
Management is considering the following course of action to increase net income: Reduce the selling price by 4%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 20%.
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Queensland Company CVP Income Statement
For the Month Ended April 30, 2014
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Total
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Per Unit
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Sales (9,000 units)
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$450,000
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$50
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Variable costs
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270,000
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30
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Contribution margin
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180,000
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$20
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Fixed expenses
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150,000
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Net income
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$ 30,000
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Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars:
(a) Assuming no changes to selling price or costs, and
(b) Assuming changes to sales price and volume as described above. Comment on your findings.