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Mathematics, 19.11.2020 09:20 payshencec21

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%. Assuming no changes to selling price or costs.

Break-even point in units = 7,500 units
Break-even point in sales dollars = $375,000
The margin of safety in dollars = $75,000

Assuming changes to sales price and volume as described above.

Break-even point in units = 8,333 units
Break-even point in sales dollars = $400,000
The margin of safety in dollars = $118,400

(b2)

Comment on the proposed course of action for computations.

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