Sales (8,000 units) $440,000 $55 Variable costs 242,000 30.25 Contribution margin 198,000 $24.75 Fixed expenses 195,426 Net income $2,574 Management is considering the following course of action to increase net income: Reduce the selling price by 3%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 10%. Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars: (Round intermediate calculations to 4 decimal places e. g. 0.2522 and final answer to 0 decimal places, e. g. 2,510.) (a) Assuming no changes to selling price or costs.

Instructions are below.

Explanation:

Giving the following information:

Salling price= $55 per unit

Variable costs= $30.25 per unit

Fixed expenses= $195,426

We need to calculate the break-even point both in units and in dollars, without any change. We need to use the following formulas:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 195,426/ (55 - 30.25)

Break-even point in units= 7,896 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 195,426/ [(55 - 30.25) / 55]

Break-even point (dollars)= $434,280

Now, we can calculate the margin of safety in dollars:

Margin of safety= (current sales level - break-even point)

Margin of safety= 440,000 - 434,280= $5,720

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know