Reference no: EM132840874

Abby Company produces and sells a product that has variable costs of $46 and a selling price of $95. Its current sales total $332,500 per month. Fixed manufacturing costs total $50,000 per month and fixed selling and administrative costs total $45,000 per month. The company is considering a proposal that will increase the selling price by 10%, increase the fixed manufacturing costs by 10%, and increase the fixed selling and administrative costs by $2,500.

Problem 1: Compute the company's current break-even point in units.

Problem 2: Compute the company's current income and the current margin of safety.

Problem 3: Compute the new contribution margin per unit assuming the proposal is accepted.

Problem 4: Compute the new break-even point in units assuming the proposal is accepted.

Problem 5: Compute the company's income assuming the proposal is accepted and sales total 3,300 units.

Problem 6: Should the proposal be accepted?