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:

Inside Diameter

The distance across the innermost part of a cylinder or tube, often measured to ensure the correct sizing for fittings or materials passing through.

Cast Iron Pipe

A type of durable pipe made from iron that has been cast in a mold, often used for water or sewage systems.

ABS Pipe

Acrylonitrile Butadiene Styrene pipe, a type of plastic piping used for waste water and vent lines due to its high resistance to impact and durability.

Valves

Mechanical devices that control the flow and direction of fluids in a system by opening, closing, or partially obstructing passageways.