United Project Consultants (UPC) provides project consultancy services to new business projects. For 2017, it has a total budgeted-revenue of $480,000, based on an average price of $240 per business project prepared. UPC would like to achieve at least 50% as a margin of safety. The company’s current fixed costs are $241,956, and variable costs average $42 per project. (Consider each of the following separately.)
Required:
1. Calculate UPC’s breakeven point and margin of safety in units.
2. Which of the following changes would help UPC achieve its desired margin of safety?
a. Average revenue per business project increases to $276.
b. Planned number of business projects prepared increases by 25%
c. United Project Consultants purchases new tax-software that results in a 7.5% increase in fixed costs, but makes project calculations easier. The software reduces variable costs by an average of $2 per project
