CH4 Super Sales Company is the exclusive distributor for a high-quality knapsack

Question

CH4

Super Sales Company is the exclusive distributor for a high-quality knapsack. The product sells for $60 per unit and has a CM ratio of 40%. The company's fixed expenses are $540,000 peryear. The company plans to sell 26,000 knapsacks this year 1. What are the variable expenses per unit? riable expenses per unit $ 36 2. Use the equation method for the following: a. What is the break-even point in units and in sales dollars? 15,000 Break-even point in units Break-even point in sales dollars $ 900,000 b. What sales level in units and in sales dollars is required to earn an annual profit of $108,000? Sales in units Sales in dollars c. What sales level in units is required to earn an annual after-tax profit of $108,000 if the tax rate is 20%? Sales in units d. Assume that through negotiation with the manufacturer, Super Sales Company is able to reduce its variable expenses by $3 per unit. What is the company's new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your final answers to the nearest whole number.) New break-even point in units New break-even point in sales dollars

Explanation / Answer

2) Equation method contribution = fixed expense (60 - 36)*x    = 540,000 x = 22500 sales dollar x   *.40    = 540,000 x = 1350000 2a) break even point in units 22,500 break even point in sales dollars 1,350,000 2b) Equation method contribution = fixed expense (60 - 36)*x    = 540,000+108000 x = 27000 sales dollar x   *.40    = 540,000+108000 x = 1620000 break even point in units 27,000 break even point in sales dollars 1,620,000 2c) profit before tax = 108000/.80= 135000 Equation method contribution = fixed expense (60 - 36)*x    = 540,000+135000 x = 28125 Sale in units 28,125 2d) Equation method contribution = fixed expense (60 - 33)*x    = 540,000 x = 20000 sales dollar x   *.45   = 540,000 x = 1200000 break even point in units 20,000 break even point in sales dollars 1,200,000 3a) BEP(units) = fixed cost/contribution margin per unit BEP(dollar sales) = fixed cost/contribution margin break even point in units 22,500 break even point in sales dollars 1,350,000 3b) BEP(units) = (fixed cost+ annual profit)/contribution margin per unit BEP(dollar sales) =( fixed cost+ annual profit)/contribution margin break even point in units 27,000 break even point in sales dollars 1,620,000 3c) break even point in units 27,000 (540000+135000)/24= 28125 3d) break even point in units 20,000 break even point in sales dollars 1,200,000

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