Question

Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personn to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really hum at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on h courteous staff to attract and retain customers who otherwise might go to other western wear stores. Becaus sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restock and training new salespeople. $ 80.00 40.50 14.50 55.00 $ Sales price Per unit variable expenses Purchase cost Sales commissions Total per unit variable costs Total annual fixed expenses Advertising Rent Salaries Total fixed expenses $127,500 163,000 269,500 $560,000 Required: 1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars. 2. If Bubba's sells 23,000 hats, what is its before-tax income or loss? Support your answer by preparing a con statement. 3. If Bubba's sells 35,000 hats, what is its margin of safety (MOS) and MOS ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $180,625 the new breakeven point in units? What would be the before-tax income or loss if 23,000 hats are sold with th Complete this question by entering your answers in the tabs below.

Answer 1

Answers (0) Break even point yn unutsa Fixed cost contribution margin per unit sales price per unit - Variable cost contribution margin per unit = per unot = $ 80 - $55 =$25 $560,000 .: Break even point in units a $25 = 22,400 units Break even point in dollar = Fixed cost contribution margin ratio contribution x 100 contribution margin ratio = Sales . .= $25 xloo $ 80 = 31.2504. :: Break even point in dollars = $500,000 31-25.1, =$1,792000

121 Income Statement = $1840,000 sales (2.3000 x 80) les - Variable costs Purchase cost (23000x 40.5 = 931500) sales commission (23000x14:5)= (333,500) contribution margin = $ 575000 Fixed cost : =($ 560,000) lav; operating Income = $15000 Operating income Margin of safety = in unulis contribution margin perunat 35000 x 25) - 5,60,000 25 = 875000-569000 25 = 12600 units margin of safety in dollars 3 operating Income contribution mangim ratio - JSON XI)- đ60,000 31.25 l =$ 1008,000 Margin of safety ratio = margin of safety in unuts xoo Total sales on units 2 12600 x 100 35000 = 36.40 Margin of saletyratio

(40 . Fixed cost Break even point in unutsa contribution margin per unit Contribution margimpen unt2 sales price por unut - Vogliable cost per unit SA 80- 40.5 1. = $39.5 Fixed cost = $127.500 + $ 163000 + 269,500-+ 180,625) = $1740,625 $740,615 .: Break even point $39.5 18750 units Income statement sales (23000X80) = $1840,000 leks vaarable cost: purchase cost (23000 x 40:1) = (931,500) = 408,500 Contribution margin ley Fixed cost: Advenhung 27500 Rent salanes 450,125 163000 (E740,625) 26% $167,875. operating operating Income - Is anks