Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY CVP...
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Accounting
Victoria Company reports the following operating results for the month of April.
VICTORIA COMPANY CVP
Income Statement For the Month Ended April 30, 2020
Total / Per Unit
Sales (9,000 units) $450,000 / $50
Variable costs 270,000 / 30
Contribution margin 180,000 / $20
Fixed expenses 150,000
Net income $30,000
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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