Reference no: EM133010260
Question - Jellybelly Ltd produces a single product. The projected income statement for the coming year is as follows:
Sales (35,000 units @ $20) $700,000
Total Variable Costs $(385,000)
Contribution Margin $315,000
Total Fixed Costs $(196,600)
Profit $118,400
Required -
a. Compute the break-even point in units and sales dollars. (Note: round to the nearest dollar).
b. Compute the new operating income if sales are 10 per cent higher than expected.
c. If the variable cost became $12 per unit, what would the new break-even amount be in units?
d. Explain what is meant by a margin of safety and what would this margin be if Jellybelly Ltd sold 30,000 units per year? (Note: use your answer from Part c.)
e. Explain the meaning of a 'relevant range' and given an example.