Break-Even and Target Profit Analysis

Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $60 per unit and has a CM ratio of 40%. The company's fixedexpenses are $360,000 per year. The company plans to sell 17,000 bookbags this year.

1. What are the variable expenses per unit?
2. Using the equation method:
a. What is the break-even point in units and in sales dollars?
b. What sales level in units and in sales dollars is required to earn an annual profit of $90,000?
c. Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses by $3 per unit. What is the company's newbreak-even point in units and in sales dollars?
3. Repeat (2) above using the formula method.
0 0
ReportAnswer #1
1.) $36
CM ratio = 40% so 40% * 60 = $24 profit, or $36 variable cost

a.) 360,000 = $24x
x= 15,000 units
b.) 15,000 * 60 = $900,000 Sales
360,000 = $27x
x = 13,333.33 units
x * 60 = $800,000 Sales
Add Answer
Add Answer of:
Break-Even and Target Profit Analysis
Your Answer: What's your source?
Not the answer you're looking for? Ask your own question. Our experts will answer your question WITHIN MINUTES for Free.
More Questions Additional questions in this topic.
Ask a Question
Related Questions