The Bruggs & Strutton Company Manufactures an Engine for Carpet

question 52

Essay

The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units. $\begin{array}{l}\begin{array}{|ll}\hline \text { Sales } \\\hline \text { Less: Cost of goods sold } \\\hline \text { Gross margin } \\\hline \text { Less: Operating expenses } \$ \\\hline \text { Net income } \\\hline\end{array}\begin{array}{|l|}\hline \$ 1,600,000 \\\hline 1.120,000 \\\hline \$ 480,000 \\\hline \quad 100,000 \\\hline \$ 380,000 \\\hline\end{array}\end{array}$
Cost of goods sold consists of $810,000 of variable costs and $310,000 of fixed costs. Operating expenses consist of $30,000 of variable costs and $70,000 of fixed costs.
Required:
A. Calculate the break-even point in units and sales dollars.
B. Calculate the safety margin.
C. Bruggs & Strutton received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order.

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Definitions:

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