ls recreational equipment. One of the company\'s products, a small camp stove, s

Question

ls recreational equipment. One of the company's products, a small camp stove, sells for $90 per unit. Varlable expenses are $63 per stove, and fixed expenses associated with the stove total $121,500 per month. Required: t What is the break-even point in unit sales and in dollar sales? 2. the variable expenses per stove increase as a perce Assume that the fixed expenses remain unchanged) 3. At present, the compan is selling 20,000 stoves per month. The sales manager is convinced that a e as a percentage of the selling price, will it result in a higher or a lower break-even point? in a 25% increase in monthly sales of stoves. Prepare two contribution format income present operating conditions, and one as operations would appear after the proposed changes 4. Refer to the data in Required 3. How many per month? stoves would have to be sold at the new selling price to attain a target profit of $75,000 Complete this question by entering your answers in the tabs below. Required Required 2 Required 3 Reqired4 What is the break-even point in unit sales and in dollar sales? Break even point in Break-even point in dolar saies unit sales Required 2 > 0

Explanation / Answer

Per unit Sales (18000 Units) 90 Variable Expenses 63 Contribution margin 27 Fixed Expenses 121500 Requirement 1 CM Ratio = Contribution / Sales X100 = 27/93 X100 = 30% Break even point in units = Fixed Expenses/ Contribution Per unit. = 121,500/27 = 4,500 stoves Break even point in sales dollars = Fixed Expenses/ CM Ratio = 121,500/30% = $350,000 Requirement 2 Increase in variable expense per stove as a percentage of the selling price results to lower the break even point. Requirement 3 Outback Outfitters Contribution Margin Income Statement Proposed Proposed 20000 Stoves 25000 Stoves Total Per unit Total Per unit Sales 1800000 90.00 2025000 81.00 Variable Expenses 1260000 63.00 1575000 63.00 Contribution margin 540000 27.00 450000 18.00 Fixed Expenses 121500 121500 Operating Income 418500 328500 Requirement 4 Target Profit 75000 Fixed Expenses 121500 Required contribution margin 196500 Proposed Contribution per unit 18 Unit sales needed to attain the target profit 10917

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