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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 46
Break-Even in Units and Sales Dollars, Margin of Safety
Drake Company produces a single product. Last year's income statement is as follows:
Required:
1. Compute the break-even point in units and sales revenue.
2. What was the margin of safety for Drake Company last year?
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $250,000 per year, but will lower variable costs to 45 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. What is the new break-even point in units, assuming the investment is made?
Drake Company produces a single product. Last year's income statement is as follows:
Required:
1. Compute the break-even point in units and sales revenue.
2. What was the margin of safety for Drake Company last year?
3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $250,000 per year, but will lower variable costs to 45 percent of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming Drake makes this investment. What is the new break-even point in units, assuming the investment is made?
Explanation
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1.Compute contribution margin per unit a...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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