Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it f
ID: 2522018 • Letter: S
Question
Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it follows Number of canoes produced and sold Total costs Variable costs Fixed costs 110,000 $150,000 $180.000 $ 99,000 99000 99000 209,000 $249,000 $279,000 Total costs Cost per unt Variable cost per unit Fixed cost per unit Total cost per unit 200.00 $200.00 $ 200.00 180.00132 00 110.00 s 380 00 102.00 310 00 1. Suppose that Sandy Bank raises its seling price to $500 per canoe. Caloulate its new break-even point in units and in sales dollars. (Do not round intermediate caliculations. Round your final answers to nearest whole number.) New Break-Even Units Break-Even Sales Revenue Bank sells 1,590 canoes, compute its margin of safety in dollars and as a percentage of sales (Use the new sales price of $500.) (Round 2 ISandy your answers to the nearest whole number) Margin of Safety Percentage of Sales so 89,a 8 9Explanation / Answer
Solution-1:
Break-even Point (BEP in Sale Units) = (Fixed Cost) / (Sale Price – Variable Cost)
= 99,000/ (500 – 200)
= 99,000/ 300= 330 Units
Break-even Point (BEP in Dollars) = Number of Break-even Units * Selling Price
330 units * 500 = 165,000
Solution-2:
Number of canoes sold
1590
Assumed Selling Price
500
Sale value
795,000
Less: Variable cost (200 per unit)
318,000
Contribution
477,000
Less: Fixed cost
99,000
Net Income
378,000
Break-even Sales at 500 price
165,000
Margin of safety
213,000
Margin of Safety (%)
795,000
Solution-3:
For the required profit; Break-even point can be calculated using the formulae as below:
(Fixed Cost + Desired Profit) / Contribution Per unit
= (99,000+ 120,000) / (500- 200)
= 219,000 / 300
= 730 units.
Number of canoes sold
1590
Assumed Selling Price
500
Sale value
795,000
Less: Variable cost (200 per unit)
318,000
Contribution
477,000
Less: Fixed cost
99,000
Net Income
378,000
Break-even Sales at 500 price
165,000
Margin of safety
213,000
Margin of Safety (%)
795,000
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