Margin of Safety (Single Product). Mammoth Company has monthly fixed costs totaling $200,000 and variable costs of $40 per unit. Each unit of product is sold for $50 (these data are the same as the previous exercise). Assume Mammoth Company expects to sell 24,000 units of product this coming month.
a.) Find the margin of safety in units.
b.) Find the margin of safety in sales dollars.
CVP Sensitivity Analysis (Single Product). Xavier Company has monthly fixed costs totaling $200,000 and variable costs of $40 per unit. Each unit of product is sold for $50. Xavier expects to sell 30,000 units each month (this is the base case). For each of the independent situations in requirements b through d, assume that the number of units sold remains at 30,000.
a.) Prepare a contribution margin income statement for the base case.
b.) Refer to the base case. What would the operating profit be if the unit sales price decreases 10 percent?
c.) Refer to the base case. What would the operating profit be if the unit variable cost increases 5 percent?
d.) Refer to the base case. What would the operating profit be if total fixed costs decrease 20 percent?