Question - Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units.
(a) Calculate the operating income for July.
(b) Calculate the break-even point in units sold and total revenues.
(c) Management is considering the use of automated production equipment. If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month.
(1) Calculate operating income at a volume of 12,000 units per month with the new cost structure.
(2) Calculate the break-even point in units with the new cost structure.