CVP analysis, margin of safety. (CMA, adapted) Technology

CVP analysis, margin of safety. (CMA, adapted) Technology Solutions sells a ready-to-use software product for small businesses. The current selling price is $300. Projected operating income for 2011 is $490,000 based on a sales volume of 10,000 units. Variable costs of producing the software are $120 per unit sold plus an additional cost of $5 per unit for shipping and handling. Technology Solutions annual fixed costs are $1,260,000. 1. Calculate Technology Solutions breakeven point and margin of safety in units. 2. Calculate the company’s operating income for 2011 if there is a 10% increase in unit sales. 3. For 2012, management expects that the per unit production cost of the software will increase by 30%, but the shipping and handling costs per unit will decrease by 20%. Calculate the sales revenue Technology Solutions must generate for 2012 to maintain the current year’s operating income if the selling price remains unchanged, assuming all other data as in the original problem.

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