A. Compute the current break-even point in units, and compare it to the break-ev

Question

A.
Compute the current break-even point in units, and compare it to the break-even point in units if Mary’s ideas are used.

Current breakeven point. ______pair of shoes

New Break even ppoint _____pair of shoes

B.Compute the margin of safety ratio for current operations and after Mary’s changes are introduced

Current margin of safety ratio____

New margin of safty ratio____

C.Prepare a CVP income statement for current operations and after Mary’s changes are introduced.
Current and New

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Hill Company uses budgets in controlling costs. The August 2014 budget report for the company’s Assembling Department is as follows.

HILL COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2014 Difference
Manufacturing Costs
Budget
Actual Favorable F
Unfavorable U
Neither Favorable
nor Unfavorable N Variable costs Direct materials $56,960 $55,960 $1,000 F Direct labor 59,520 56,280 3,240 F Indirect materials 31,360 31,490 130 U Indirect labor 21,120 20,620 500 F Utilities 21,760 21,590 170 F Maintenance 10,240 10,660 420 U Total variable 200,960 196,600 4,360 F Fixed costs Rent 12,070 12,070 –0– N Supervision 18,190 18,190 –0– N Depreciation 5,940 5,940 –0– N Total fixed 36,200 36,200 –0– N Total costs $237,160 $232,800 $4,360 F
The monthly budget amounts in the report were based on an expected production of 64,000 units per month or 768,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 62,000 units were produced.

Explanation / Answer

Current Scene :SP pu $41Less VC pu $23--------------------Cont pu $18So Current BEP = FC/Cont pu = 266,700/18 = 14,817 unitsCurrent Sales = 18440 unitsSO Margin of Safety (MOS) = budgeted sales

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