Sandy Bank sells its canoes for $450 each. 1. Suppose that Sandy Bank raises its

Question

Sandy Bank sells its canoes for $450 each.

1. Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars. (Round your "Unit" answer to the nearest whole number. Round your intermediate calculations to whole dollars and percentages.)

2. If Sandy Bank sells 1,510 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) (Round your answers to the nearest whole number.)

3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $110,000 profit. (Round your answer to the nearest whole number.)

Explanation / Answer

Required: 1. Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars. (Round your "Unit" answer to the nearest whole number. Round your intermediate calculations to whole dollars and percentages.) New Break-Even Units 551 Canoes                 Break even is a point where Sales = Costs Break-Even Sales Revenue 275500 $ Assuming the quantity of canoes sold as X 500X - 160X = $ 187,200 Thus, 340 X = $ 187,200 or X = $ 187,200 / 340 = 551 canoes Since the breakeven point of Sandy Bank is 551 canoes 2. If Sandy Bank sells 1,510 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) (Round your answers to the nearest whole number.) The margin of safety in dollars will be 1,510 canoes - 551 canoes = 959 canoes X $ 500 = Margin of Safety 479500 $ Sale Value for 1,510 Canoes = 1,510 X 500 = 755000 $ Percantage of Sales 64 %                       % of Total Sales = 64% 3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $110,000 profit. (Round your answer to the nearest whole number.) Let the number of canoes to be sold be X Target Sales Units 874 Canoes                                     Thus, 500X - 160X - $ 187,200 = $ 110,000 Hence, 340X = $ 110,000 + $ 187,200 = $ 297,200 Therefore, X = $ 297,200 / $ 340 = 874 canoes

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