Daisy Childs has decided to start an e-tail business which will sell doggie trea

Question

Daisy Childs has decided to start an e-tail business which will sell doggie treat dispensers. Daisy will sell each unit for $60, and will purchase the units from a foreign supplier for $20 each. Import duties are 10% the amount paid to the foreign supplier and freight-in is expected to be $4 per unit. Packaging and shipping the units to customers will cost another $6 per unit. Daisy has contracted out the web page design and maintenance for $2,520 per month. Daisy expects no other costs as long as she doesn't sell more than 1,000 units per month. Daisy's monthly sales revenue needed for her business to breakeven is (enter commas where appropriate) The number of units must Daisy sell to make a target profit of $20,000 is (enter commas where appropriate)

Explanation / Answer

Variable costs:

Daisy's monthly sales revenue to break even is $5,400.

Number of units must daisy sell to make $20,000 profit is:

Required contribution = fixed cost +profit = 2520 + 20000 = 22520

Number of units to sell is  804.29

Break even point a Contribution per unit               28.00 b Fixed costs                2,520 c=b/a BEP units               90.00 d Selling price                     60 e= c*d BEP sales                5,400

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