Mace Windu Duke Skywalker owns and operates “The Force Company” a light sabre pr
ID: 2570598 • Letter: M
Question
Mace Windu Duke Skywalker owns and operates “The Force Company” a light sabre producing company. He is considering the introduction of a new custom light sabre that he estimates will generate demand for 8,000 light sabers. The sabers will sell for $100.00 each, with a unit variable cost of $40.00, and annual fixed costs of $600,000. Required: 1. Determine the number of sabers to be sold to break-even. 2. Determine the number of sabers to be sold to earn an operating profit of $22,000. 3. What is the safety margin in units when the company makes an operating profit of $22,000? 4. If 8,600 sabers are sold, determine the operating income. If sales price was increased by 15 percent, variable cost per unit increased by 10 percent, and fixed cost increased by $6,000, determine the new break-even point.
Please put it in Excel and utilize as many formulas as possible
Explanation / Answer
The Force Company
Unit sales price
$100
Less: Variable cost
$40
Contribution Margin - per unit
$60
Fixed costs
$6,00,000
1. Determine the number of sabers to be sold to break-even.
Breakeven point (in units)
= Fixed costs / Contribution margin per unit
= $600,000 / 60
10,000
2. Determine the number of sabers to be sold to earn an operating profit of $22,000.
Fixed costs
$6,00,000
Add: Operating profit desired
$22,000
Total contribution required
$6,22,000
Contribution Margin - per unit
$60
Number of units to be sold
= Total contribution required / Contribution margin per unit
= $622,000 / 60
10,367
3. What is the safety margin in units when the company makes an operating profit of $22,000?
Number of units - sold at the profit
10,367
Less: Breakeven point in units
10,000
Safety Margin - in units
367
4. If 8,600 sabers are sold, determine the operating income. If sales price was increased by 15 percent, variable cost per unit increased by 10 percent, and fixed cost increased by $6,000, determine the new break-even point.
Units sold - 8,600
Per Unit
Total
Sales
$100
$8,60,000
Less: Variable cost
$40
$3,44,000
Contribution Margin
$60
$5,16,000
Less: Fixed costs
$6,00,000
Net income / (Loss)
-$84,000
If the change in price, variable cost and fixed cost is done
Units sold - 8,600
Per Unit
Total
Sales
$115
$9,89,000
Less: Variable cost
$44
$3,44,000
Contribution Margin
$71
$6,45,000
Less: Fixed costs
$6,06,000
Net income / (Loss)
$39,000
Computation of Breakeven Point - with change in price, variable cost and fixed cost
Unit sales price
$115
Less: Variable cost
$44
Contribution Margin - per unit
$71
Fixed costs
$6,06,000
Breakeven point (in units)
= Fixed costs / Contribution margin per unit
= $606,000 / 71
8,535
The Force Company
Unit sales price
$100
Less: Variable cost
$40
Contribution Margin - per unit
$60
Fixed costs
$6,00,000
1. Determine the number of sabers to be sold to break-even.
Breakeven point (in units)
= Fixed costs / Contribution margin per unit
= $600,000 / 60
10,000
2. Determine the number of sabers to be sold to earn an operating profit of $22,000.
Fixed costs
$6,00,000
Add: Operating profit desired
$22,000
Total contribution required
$6,22,000
Contribution Margin - per unit
$60
Number of units to be sold
= Total contribution required / Contribution margin per unit
= $622,000 / 60
10,367
3. What is the safety margin in units when the company makes an operating profit of $22,000?
Number of units - sold at the profit
10,367
Less: Breakeven point in units
10,000
Safety Margin - in units
367
4. If 8,600 sabers are sold, determine the operating income. If sales price was increased by 15 percent, variable cost per unit increased by 10 percent, and fixed cost increased by $6,000, determine the new break-even point.
Units sold - 8,600
Per Unit
Total
Sales
$100
$8,60,000
Less: Variable cost
$40
$3,44,000
Contribution Margin
$60
$5,16,000
Less: Fixed costs
$6,00,000
Net income / (Loss)
-$84,000
If the change in price, variable cost and fixed cost is done
Units sold - 8,600
Per Unit
Total
Sales
$115
$9,89,000
Less: Variable cost
$44
$3,44,000
Contribution Margin
$71
$6,45,000
Less: Fixed costs
$6,06,000
Net income / (Loss)
$39,000
Computation of Breakeven Point - with change in price, variable cost and fixed cost
Unit sales price
$115
Less: Variable cost
$44
Contribution Margin - per unit
$71
Fixed costs
$6,06,000
Breakeven point (in units)
= Fixed costs / Contribution margin per unit
= $606,000 / 71
8,535
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.