Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it f

Question

Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it follows Number of 750 400 600 and sold Total costs costs $52.000 78,000 97.500 Fixed costs $180.000 $180,000 $180.000 Total costs $232,000 $258,000 $277,500 Cost per unit 130.00 Variable cost per 130.00 130.00 $ unit Fixed cost per 450.00 300.00 unit 240.00 Total cost s 580.00 $ 430.00 370.00 unit Required: 1. Suppose that Sandy Bank raises its selling price to S500 per canoe. Calculate its new break-even point in units and in sales dollars. (Do not round intermediate calculations. Round your final answers to nearest whole number.) Answer is complete and 48 Canoes 2. If Sandy Bank sells 680 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.) Margin of Saf 3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $100,000 profit (Round your answer to the nearest whole number.)

Explanation / Answer

1) Calculation of break even point in units and dollars: Contribution margin per unit= selling price- variable cost per unit                                                           =500-130=$370 New break even point= Fixed cost/ contribution margin per unit                                               =180000/370=487 canoes Contribution margin ratio=370/500*100=74% Break even point in dollars=180000/0.74=$243243 2) Calculation of margin of safety Margin of safety= Total sales- break even sales                         =(680*500)-243243=340000-243243=$96757 Margin of safety=$96757 Margin of safety(in percent)=96757/340000*100=28% 3) calculation of units sold: Units sold= (fixed cost+ target income)/contribution margin per unit                    =(180000+100000)/370= 757 canoes target sale units=757 canoes

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