Footwear Inc. manufactures a complete line of men\'s and women\'s dress shoes fo

Question

Footwear Inc. manufactures a complete line of men's and women's dress shoes for independent merchants. The average selling price of its furnished product is $75 per pair. The variable cost for this same pair of shoes is $60. Footwear Inc. incurs fixed costs of $ 180,000 per year. a. what is the break-even point in pairs of shoes for the company? b. What is the dollar sales volume the firm must achieve to reach the break-even point? c. What would be the firm's profit or loss at the following units of production sold 4,000 pairs of shoes? 9,000 pairs of shoes? 15,000 pairs of shoes?

Explanation / Answer

Answer (a) Breakeven Point = Fixed Expenses/Contribution margin Contribution Margin = 75-60 = 15 Breakeven Point = = 180000/15 = 12000 Units (b) Dollar sale volume of breakeven point = 12000*75 = $ 900000 c Firm's Profit/loss Sale (Units) 4000 9000 15000 Contribution per unit 15 15 15 Total Contribution 60000 135000 225000 Less Fixed Expenses 180000 180000 180000 Profit/(Loss)       (120,000)       (45,000)       45,000

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