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problem: Aunt Kity's Pies is a small bakery that sells its products to local restaurants and supermarkets. The Bakery's most recent income statement is given below:

Sales

$78,000

Variable Costs

$24,960

Contribution Margin

$53,040

Fixed costs

$29,240

Net Income

$23,800

[A] find out Aunt Kity's Contribution Margin Ratio?

[B] find out Aunt Kity's breakeven level of sales revenues?

[C] find out Aunt Kity's Margin of Safety in the most recent year?

[D] Suppose that Aunt Kity's is considering investing in new machinery that will reduce variable costs per unit by 10%. In order to achieve the savings, bakery's fixed costs would increase by $6,360. What will happen to the breakeven level of sales revenues?

 

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