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    Calculating the BEP and Margin of safety for a given Sales-Mix

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    4. Penny Company offers two products. At present, the following represents the usual results of a month's operations:

    Product A Product B
    Per Unit Per Unit Combined
    Sales $120,000 $1.20 $80,000 $0.80 $200,000
    Variable costs 60,000 0.60 60,000 0.60 120,000
    Contribution margin $60,000 0.60 $20,000 $0.20 80,000
    Fixed costs 50,000
    Operating profit $30,000

    Required: 20 Points
    a. Find the break-even point in dollars.

    b. Find the margin of safety in dollars.

    c. The company is considering decreasing product A's unit sales to 80,000 and increasing product B's unit sales to 180,000, leaving unchanged the selling price per unit, variable cost per unit, and total fixed costs. Would you advise adopting this plan?

    d. Refer to (c) above. Under the new plan, find the break-even point in dollars.

    e. Under the new plan in (c) above, find the margin of safety in dollars.

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    https://brainmass.com/business/cost-volume-profit-analysis/calculating-bep-margin-safety-sales-mix-590771

    Solution Summary

    The solution depicts the steps to estimate the BEP and Margin of safety for a given sales mix. The usual results of a month's operations are given.

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