Question

Check my worl Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $110 per unit. Variable expenses are $77 per stove, and fixed expenses associated with the stove total $161,700 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 company is selling 9,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. 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 $75,000 per month? Complete this question by entering your answers in the tabs below.

Answer 1

. Selling (-) variable price per Voit $110 fir Vnit cost per Unit $77. will & 33 per unit = 1 Cordsribution per Unit sales per Unit P/V ratio 33 To -X100 30 y. Break even point in unit Sales Fixed cost $161700 33 4900 Units Contonbution per vnit even in sales. Break point dollar Fixed Cost patio $ 161700 to 30 % $539000 P/V Now, the raniable expenses increase as a percentage of the selling price.. So, variable cost per unit ($77 X 110%) $84.70 selling price = $ 110 pes Unit (s variable Cost & $84.70 4. Contribution $25.30 per vnet her Onit

i Bresck men binti P/x ratio - Contribution per One her Unit X 100 sales per Vnit. -X100 25.30 110 - 237. & Break Eren int in sales vrits. point in Cost Fixed Contribution per Unit $ 161700 O $25.30 - 6391 vnets & Break Fren boint in Sales volun dollar Fixed Cast. . Ooops at Plvratio - $ 16170 237 no - $703043 So If the variable expenses per store increase as a percentage of the selling price & then it will result a higher Break Even point.

on Income Statement ng Sale.price Amount 89100 Selling output = 9000 units ) Contribution Margin Income Before dedecting Sale Amount Alter deducting sala freannt condition Sales. (9000 XILO) Future Condition 990000 Sales (9000 x 99 2) nariable cost 09000X77) 693000-2 raviable cost I (9000x77) Contribution Margir 297000 Contribution Margu 693000 " Margin (198000 161700 (-) Fixed Cost 1161700 Fixed cost 36300 preaft [135300 profit selling price. $ C110-10%) 99 per Unit ( raniable Cost 77 bes Unit. Contribution per Unit 22 required sales to achieve a target profft of fet Profit $ 75000 $1617000 + 75000) Contnbution per Unit - $ 236700 - z 10760 Unel $ 22. $ 22