Check my work Outback Outfitters sells recreational equipment. One of the compan
ID: 2540215 • Letter: C
Question
Check my work Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $100 per unit. Variable expenses are $70 per stove, and fixed expenses associated with the stove total $144,000 per month Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.) 3. At present, the c mpany is selling 16,000 stoves per month. The sales manager is convinced thata 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves, prepare two contribut on format income statements one under present operating conditions, and one as operations would appear after the proposed changes 5 eBook Print ences4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $79,000 per month? Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4 What is the break-even point in unit sales and in dollar sales? Break-even point in unit sales KPre2 of 3 l Next>Explanation / Answer
1. Break-even point in unit sales and dollars is as computed below:
2. When variable cost per unit will increase as a percentage of sale then the break even point will also increase.
Example: lets take variable cost as $80 per unit.
Correct answer is higher break-even point.
3. Present and Proposed Income Statement is as prepared below:
4. Stoves to be sold to attain a target profit of $79,000 is 11,150
Description Per unit Sales 100 Less: Variable Cost 70 Contribution Margin 30 Contribution Margin Ratio 30.00% Less: Fixed Cost 144,000 Break-even sales in dollars (Fixed Cost/Cont Margin ratio) 480,000 Break-even sales in units (Fixed Cost/Cont Margin per unit) 4,800