Outback Outfitters sells recreational equipment. One of the company’s products,

Question

Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $110 per unit. Variable expenses are $77 per stove, and fixed expenses associated with the stove total $155,100 per month.

Required:

1. What is the break-even point in unit sales and in dollar sales?

2. 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.)

3. At present, the company is selling 11,000 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.

4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $80,000 per month?

Explanation / Answer

1.

517000

2.

Resulted in higher breakeven point

3.

4.

$ Per Unit Sale Price 110 Variable Cost 77 Contribution 33 $ Fixed Cost 155100 Break even (Units) 4700 Break even (Sales)

517000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.