Wanda wants to oepn a health-food store. Her monthly expenses are rent $3,500, u

Question

Wanda wants to oepn a health-food store. Her monthly expenses are rent $3,500, utilities of $1,000, insurance of $500, and payroll of $4,250. She estimates that her cost of goods is approximately 65 percent of sales. Wanda would like to make $4,000 a month for herself.

a. What is Wanda's contribution margin?

b. How much does she need in monthly sales to break even?

c. How much does she need in monthly sales to make a profit of $4,000?

d. Construct a break-even chart for Wanda's health-food store.

Explanation / Answer

If product is 65%, then the other costs are 35%

Add up the other costs........($9250)

Break even means 35% of sales = $9250

Product costs + operating costs = break even

35 (sales) = 9250

sales = 9250/.35

sales would have to be about $26429 to break even

Revenue necessary for profit ?

Add the $4000 to the break even amount

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