3. Selling price increased by 10%. Assumption 3: Compute break even point in BOTH sales dollars and units with selling price =$???, variable costs = $3, and fixed costs = $60,000 per month. Step 1: Compute the new selling price. New Selling price Old selling price % Increase Selling price increase per unit per unit Old selling price Selling price increase New Selling price - per unit per unit Step 2: To compute the BE in Units we first have to compute the Contribution Margin (CM) per Unit sales price / unit variable cost/ unit / per unit Contribution margin per unit = Breakeven in Units = Fixed Costs CM per unit units (Round to nearest cent-2 decimal places) Step 3: To compute the BE in Sales Dollars we first have to compute the Contribution Margin (CM) Ratio CM ratio = CM ( (DO NOT ROUND or you will not get the correct answer for BE Sales Dollars) Sales Breakeven in Sales Dollars = (Round to nearest cent-2 decimal places) Fixed Costs CM ratio OR These will be a few cents different due to rounding Breakeven in Sales Dollars = Sales price/unit Breakeven in units (Round to nearest cent-2 decimal places) OR Breakeven in Sales Dollars = Sales price/unit Breakeven in units 2. Fixed costs increased to $75,000 Assumption 2: Compute break even point in BOTH sales dollars and units with selling price = $9, variable costs = $3, and fixed costs = $75,000 per month. Step 1: To compute the BE in Units we first have to compute the Contribution Margin (CM) per Unit sales price / unit variable cost / unit per unit Contribution margin per unit = Breakeven in Units - Fixed Costs CM per unit units Step 2: To compute the BE in Sales Dollars we first have to compute the Contribution Margin (CM) Ratio CM ratio = Sales (DO NOT ROUND or you will not get the correct answer for BE Sale Breakeven in Sales Dollars = Fixed Costs CM ratio OR Breakeven in Sales Dollars = Sales price/unit X Breakeven in units Exercise F: Never Late Delivery currently delivers packages for $9 each. The variable cost is $3 per package, and fixed costs are $60,000 per month, 79 points 79 points Compute the break-even point in BOTH sales dollars and units under each of the following independent assumptions. 1. The costs and selling price are as given above. 2. Fixed costs are increased to $75,000. 3. Selling price is increased by 10%. (Fixed costs are $60,000.) 4. Variable cost is increased to $4.50 per unit. (Fixed costs are $60,000 and selling price is $9.) 5. Calculate the margin of safety for each option assuming sales were $140,000. 6. Comment which option would be the best and why. Exercise F Assumption 1: Compute break even point in BOTH sales dollars and units with selling price = $9, variable costs = $3, and fixed costs - $60,000 per month. Step 1: To compute the BE in Units we first have to compute the Contribution Margin (CM) per Unit Contribution margin per unit sales price / unit variable cost / unit per unit Breakeven in Units units Fixed Costs CM per unit Step 2: To compute the BE in Sales Dollars we first have to compute the Contribution Margin (CM) Ratio CM ratio = (DO NOT ROUND or you will not get the correct answer for BE Sales Dollars) CM Sales Breakeven in Sales Dollars = Fixed Costs CM ratio 14. Variable costs increase to $4.50 per unit Assumption 4: Compute break even point in BOTH sales dollars and units with selling price = $9, variable costs = $4.50, and fixed costs = $60,000 per month Step 1: To compute the BE in Units we first have to compute the Contribution Margin (CM) per Unit Contribution margin per unit sales price / unit variable cost/ unit per unit Breakeven in Units units (Round to nearest cent-2 decimal places) Fixed Costs CM per unit Step 2: To compute the BE in Sales Dollars we first have compute the Contribution Margin (CM) Ratio CM ratio = (DO NOT ROUND or you will not get the correct answer for BE Sales Dollars) CM Sales Breakeven in Sales Dollars = Fixed Costs CM ratio OR These will be a few cents different due to rounding. Breakeven in Sales Dollars = Sales price/unit Breakeven in units ??? 5. Calculate margin of safety for each option if sales are $140,000 Assumption 5: Calculate the margin of safety for each assumption above (1-4) if sales are $140,000 Margin of Safety Current Sales Breakeven Sales Dollars Option 1 Option 2 Option 3 Option 4 6. Comment which option would be the best and why