# Bruggs & Strutton Company

The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the “Snooper.”  Cost and revenue data for the “Snooper” are given below, based on sales of 40,000 units.

Sales \$1,600,000

Less: Cost of goods sold    1,120,000

Gross margin                 \$   480,000

Less: Operating expenses      100,000

Operating income before taxes \$   380,000

Cost of goods sold consists of \$800,000 of variable costs and \$320,000 of fixed costs.  Operating expenses consist of \$40,000 of variable costs and \$60,000 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.

D. Bruggs also received an order for 2,500 units at \$29 per unit.  If packaging costs will not be reduced on this order and only one order (“C” or “D”) can be accepted, which order is more attractive?

The break-even point

The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the “Snooper.”  Cost and revenue data for the “Snooper” are given below, based on sales of 40,000 units.

Sales \$1,600,000

Less: Cost of goods sold    1,120,000

Gross margin                 \$   480,000

Less: Operating expenses      100,000

Operating income before taxes \$   380,000

Cost of goods sold consists of \$800,000 of variable costs and \$320,000 of fixed costs.  Operating expenses consist of \$40,000 of variable costs and \$60,000 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.

D. Bruggs also received an order for 2,500 units at \$29 per unit.  If packaging costs will not be reduced on this order and only one order (“C” or “D”) can be accepted, which order is more attractive?

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