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

Question

Sandy Bank, Inc., makes one model of wooden cance. And, the information for it follows: Number of canoes produced and sold Total costs 400 600 50 ariable costs Fixed costs S 52,000 78,000 $97,500 $180,000 $180,000 180,000 $232.000 $258,000 $277.500 Total costs Cost per unit Variable cost per unit Fixed cost per unit 130.00 130.00 130.00 240.00 300.00 $ 580.00 430.00 450.00 Total cost per unit 370.00 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 correct. New Break-Even Units Canoes Break-Even Sales Revenue 243,243 2. If Sandy Bank sells 680 cances, 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 Safety Percentage of Sales 3. Calculate the number of canoes that Sandy Bank must sell at S500 each to generate S100,000 profit. (Round your answer to the nearest whole number.) Canoes

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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