50.1K
Verified Solution
Link Copied!
Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following
information to a single part which is used in the production of a wind instrument. The business earned
Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under
pressure from shareholders to increase operating income in 2020 and is therefore considering the
implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for
variable cost per unit and total fixed costs were as follows:
Variable expenses per unit: Direct Material $58
Direct Labour $74
Variable Manufacturing Overhead $48
Fixed expenses: Fixed Manufacturing Overhead $215,000
Fixed Selling Costs $65,000
Fixed Administrative Costs $160,000
Required:
g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of
safety:
(i) Increase in sales volume
(ii) Increase in total fixed costs
(iii) Increase in selling price per unit
(iv) Decrease in variable costs per unit
Answer & Explanation
Solved by verified expert
