Victoria Company produces a single product. Last year's income statement is as follows: Sales (29,000 units @ $42) $1,218,000
Less: Variable costs 812,000
Contribution margin $ 406,000
Less: Fixed costs 300,000
Operating income $ 106,000
Required
1. Compute the break-even point in units and sales dollars.
2. What was the margin of safety for Victoria Company last year?
3. Suppose that Victoria 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 that Victoria makes this investment. What is the new break-even point in units and sales dollars, assuming that the investment is made?