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i Safari File Edit View History Bookmarks Window Help 88%-, Sat 11:41 AM Q abbhosted.cuny.edu Assignments-201 Take Test: Chapter Classroom FIN 250.. Cengage Login Accounting questio.. Home Page Racing Board Corp... Remaining Time: 40 minutes, 02 seconds. Question Completion Status: Question 2 40 points Save Answer Crystal Lake sells custom shoes for special needs children. The average amount they charge for a pair is $30. Crystal Lake has calculated the average variable cost of a shoe to be $18. Its monthly fixed cost is $54,000. Instructions: Calculate each question and show all workings. 1. Calculate how many custom shoes must sell in a month to break even using the contribution margin approach. (10 points) 2 Determine the breakeven point in sales dollars using the contribution margin approach. (10 points) 3. Use the income statement approach to determine the operating income. Show all breakdown using the income statement headings. (10 points) This owner of Crystal Lake currently works for another shoe company and earns $9,600 per month. She does not want to incur the risk of owning her own business unless she believes that he can have profit of at least the amount she currently earns. Determine the number of shoes Crystal Lake must customize in a month to earn profit of $9,600. (10 points) 4. TTT Arial 3 (12pt)TE 2Explanation / Answer
Contribution per unit = (Sale – Variable cost) per unit
= $30-$18
Contribution per unit = $12
= $54,000 / $12
Breakeven point = 4500 Units
Contribution Margin Ratio =Contribution / Sales * 100
= $12 / $30 * 100
= 40%
= $54,000 / 40%
BEP (In sales) = $135,000
It is not mentioned in the question how many units the company is selling so we will take BEP units i.e. 4500 Units.
= 4500*30 – 4500*18 - $54,000
= 0
Let units to be sold = x
Operating Income = Revenue – Variable cost –Fixed Cost
$9600 = 30x – 18x - $54,000
63,600 = 12x
X = 5300 Units.
Company needs to sell 5300 Units to earn income of $9600
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