Question

IV • Gorro Sombrero is considering opening a position in a mall to sell caps. He wants to know how many caps he has to sell to reach the breakeven point. The caps would sell for $15, variable costs of $ 10 per cap, and the annual fixed costs are $ 48.000. How many caps do you have to sell annually to reach the breakeven point. (3 points) What would be the total operational costs to achieve the breakeven point? (3 points) If Cap estimates that the least that sells that business is 925 caps per month, should he set up the business? ( points) What would be the net profit before income tax that Goro would have if he sells 925 caps a month? (3 points)

Answer 1

In the third point the estimation is correct as selling 925caps per month will be more than the Break Even Point to secure a profit.

Profit in last point is for the full year.

Answer TV . contribution a Sale volue - Variable cost = $15 - $10 $5 per cap P/V Ratio = contribution per cap - 5x100 = 33.33%. Sale value per cap BEP in units = fixed cost = 48000 contribution per unit 5 TE 9600 units of caps per year Even - • Total operational cost to - variable cost & fixed +(9600x10) + 48600 achieve Break cost - $144,600] • Total projected sale of caps = 925 x 12 Months for the year = 11,100 caps per year Yes, the estimation to sell 11,100 capes per year correct because it is more than the BEP. is • Statement showing profit at 925 capsa per month sales ( 925 X 12 Months x $15) 166, 500 variable cost (925x12 Monthe x $ 10) |(1,11,000) contribution 55,500 fixed cost (48600) 7500 Earnings before interest & tax I