Calculate the break-even point in units and sales dollars

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Question - Sheridan Manufacturing Ltd. has provided you with the following CVP income statement:

Sales (5,500 units)

$1,100,000

$200

per unit

Variable costs

726,000

132

per unit

Contribution margin

374,000

$68

per unit

Fixed costs

314,160



Operating income

$59,840



Management is considering the following course of action to increase operating income: reduce the selling price by 20%, with no changes to unit variable costs or fixed costs. Management feels that this change will increase unit sales by 30%.

Required -

1. Calculate the break-even point in units and sales dollars with no change in sales.

2. Calculate the break-even point in units and sales dollars with the proposed change in sales price.

3. Should management go forward with the reduction in sales price?

Reference no: EM133176618

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