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Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY CVP...

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Accounting

Victoria Company reports the following operating results for the month of April.

VICTORIA COMPANY CVP

Income Statement For the Month Ended April 30, 2020

Total / Per Unit

Sales (9,000 units) $450,000 / $50

Variable costs 270,000 / 30

Contribution margin 180,000 / $20

Fixed expenses 150,000

Net income $30,000

Management is considering the following course of action to increase net income: Reduce the selling price by 4%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 20%.

Assuming no changes to selling price or costs.

Break-even point in units = 7,500 units

Break-even point in sales dollars = $375,000

The margin of safety in dollars = $75,000

Assuming changes to sales price and volume as described above.

Break-even point in units = 8,333 units

Break-even point in sales dollars = $400,000

The margin of safety in dollars = $118,400

(b2) Comment on the proposed course of action for computations.

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