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Question

AaBbCcDd AaBbCcDd AaB AaBbCc Su Subtitle Styles Heading 1 Heading 2 Title : .10! . H:-11Normal!!No Spac- Paragraph The M Company sells a large variety of tee shirts and sweatshirts. Asad Qadeer, the owner, is his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot the local high school. thinking of expandi These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Asad $22.00 each with a minimum order of 360 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50. Since Asad's plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $44.00 each. Hooper would pay the students a commission of $5.00 for each shirt sold. Required: 1. What level of unit sales and dollar sales is needed to attain a target profit of $17,000? 2 Assume that Ased places an initial order for 360 sweatshirts. What is his break-even point in unit sales and dollar sales? (Round your intermediate calculations and final answers to the nearest whole number.) 1 Unit sales needed to attain the target profit Dollar sales needed to attain target profit Sweet t shirts Sweet t shirts

Explanation / Answer

working note:

1. unit sales needed to attain target profit = (fixed cost + target profit ) / contribution per sweat shirt

here,

fixed cost = $0

target profit = $17,000.

contribution per sweat shirt=> sale price - variable cost = $44 sale price - $22 cost - $ 5 commission =>$17 per sweat shirt.

now,

number of sweat shirts to attain target profit = ($0 + $17,000) / $17

=>1,000 units.

dollar sales need to attain target profit = units to attain target profit * sale price per unit

=>1,000 units * $44

=>$44,000.

b.break even point in unit sales =[fixed cost i.e, purchase price of 360 shirts] / (sale price - commission per shirt)

=> (360*$22) / ($44-$5)

=>203 shirts (rounded to nearest whole number).

note: since 360 sweat shirts are already purchased we need to consider them as fixed cost to calculate break even point here.

break even dollar in unit sales

=>break even units * sale price

=>203 * $44

=>$8,932.

1 unit sales needed to attain the target profit 1,000 sweat t shirts dollar sales needed to attain target profit $44,000 2 break even points in unit sales 203 sweat t shirts break even dollar in unit sales $8,932

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