Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 1

Break-Even Units and Sales Revenue: Margin of Safety
Dupli-Pro Copy Shop provides photocopying service. Next year, Dupli-Pro estimates it will copy 2,800,000 pages at a price of $0.08 each in the coming year. Product costs include:

There is no variable selling expense; fixed selling and administrative expenses total $46,000.
Required:
1. Calculate the break-even point in units.
2. Calculate the break-even point in sales revenue.
3. Calculate the margin of safety in units for the coming year.
4. Calculate the margin of safety in sales revenue for the coming year.
5. What if the total selling and administrative expenses are reduced to $38,800? Recalculate:
a. Break-even point in units
b. Break-even point in sales revenue
c. Margin of safety in units for the coming year
d. Margin of safety in sales revenue for the coming year