Outback Outfitters sells recreational equipment. One of the company’s products,
ID: 2417612 • Letter: O
Question
Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $130 per unit. Variable expenses are $91 per stove, and fixed expenses associated with the stove total $179,400 per month.
Compute the company’s break-even point in unit sales and in dollar sales.
If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.)
At present, the company is selling 16,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes.
Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to yield a minimum net operating income of $74,000 per month? (Round your answer to the nearest whole number.)
Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $130 per unit. Variable expenses are $91 per stove, and fixed expenses associated with the stove total $179,400 per month.
Explanation / Answer
4600 units
Answer no 2 Lower break even point if selling price increased by 10% sales 143 Answer No 1 variable cost 100.1 sales 130 contribution 42.9 variable cost 91 fixed cost 179400 contribution 39 BEP in UNITS 4181.818 fixed cost 179400 BEP = fixd cost/contribution per unit BEP in UNITS4600 units
sales is dollars = 4600 *130 = 598000 no of units at present level of activity If price reduced by 10% sales 16000 130 2080000 sales 20000 127 2540000 variable cost 91 1456000 variable cost 91 1820000 contribution 39 624000 contribution 36 720000 fixed cost 179400 179400 fixed cost 179400 179400 EBIT 444600 EBIT 540600 BEP in UNITS 4600 BEP in UNITS 4983.333 answer no 4 to earn a profit of 74000 BEP = fixed cost + dersired profit/contribution per unit 179400+74000 253400 7038.889Related Questions
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