Question: The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper." Cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.
Sales $1,600,000
Less: Cost of goods sold 1,120,000
Gross margin $ 480,000
Less: Operating expenses 100,000
Operating income before taxes $ 380,000
Cost of goods sold consists of $800,000 of variable costs and $320,000 of fixed costs. Operating expenses consist of $40,000 of variable costs and $60,000 of fixed costs.
Required:
A. Calculate the break-even point in units and sales dollars.
B. Calculate the safety margin.
C. Bruggs & Strutton received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order.
D. Bruggs also received an order for 2,500 units at $29 per unit. If packaging costs will not be reduced on this order and only one order ("C" or "D") can be accepted, which order is more attractive?