NYRB sells pillows to retailers for an average of $30 each. The variable cost of every pillow is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000. NYRB operates in Cleveland, OH but is supposing a move to Miami, FL because the weather is nicer. This can cause changes in the selling price, variable costs, and fixed costs. They expect the sales volume to remain the same.
Required:
a. Evaluate the breakeven point in pillows?
b. Find the margin of safety, assuming sales total $60,000?
c. What is the breakeven level in pillows, suppose variable costs increase by 20%?
d. Evaluate breakeven level in pillows, assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent, and other fixed costs decline by $100?