Julia Child Company sells baby car seats to retailers for an average of $85 each

7.Computation of Break-even Point in Number of Car Seats:

Break-even Point = Fixed Cost/ Contribution Margin per Unit

= ($6,000+$7,000)/($85-$48)

= $13,000/$37

Break-even Point = 351.35 or 351 car seats

8.Computation of Margin of Safety:

Margin of Safety = Actual Sales - Break-even Sales

Here,

Break-even Sales = Fixed Cost / Contribution Margin Ratio

= $13,000/($37/$85)

= $13,000/43.53%

Break-even Sales = $29,864.86

Margin of Safety = $32,000 - $29,864.86 = $2,135.14

9.Computation of Break-even level in Car Seats, assuming variable costs increase by 20%:

Variable Costs = $48*(1+20%) = $57.60

Break-even Point = Fixed Cost/ Contribution Margin per Unit

= ($6,000+$7,000)/($85-$57.60)

= $13,000/$27.40

Break-even Point = 474.45 or 474 car seats

10.Computation of Break-even level in Car Seats, assuming the selling price goes up by 10%, fixed selling costs decline by 10%, and other fixed costs decline by $1,000:

Selling price = $85 *(1+10%) = $93.50

Fixed Costs = $6,000*(1-10%) + ($7,000-$1,000) = $5,400 + $6,000 = $11,400

Break-even Point = $11,400/($93.50-$48)

= $11,400/$45.50

Break-even Point = 250.55 or 251 car seats