Question

The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school. These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Hooper $18.00 each with a minimum order of 240 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50. Since Hooper's plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $36.00 each. Hooper would pay the students a commission of $6.00 for each shirt sold. Required: 1. What level of unit sales and dollar sales is needed to attain a target profit of $8,400? 2. Assume that Hooper places an initial order for 240 sweatshirts. What is his break-even point in unit sales and dollar sales? (Round your intermediate calculations and final answers to the nearest whole number.) 1. sweatshirts Unit sales needed to attain the target profit Dollar sales needed to attain the target profit Break-even point in unit sales Break-even point in dollar sales sweatshirts

Answer 1

Answer:

1)

Calculation of unit sales and dollar sales needed to attain the target profit:

Particulars	Amount	Amount
Unit sales needed to attain the target profit	=$8,400/($36-$18-$6) =$8,400/12 =700 sweatshirts	700 Units
Dollar sales needed to attain the target profit	=700 Units*$36 = $25,200	$25,200

2)

Calculation of break even point of unit sales and dollar sales at initial order of 240 sweatshirts:

Particulars	Amount	Amount
Break even point in unit sales	=(240*$18)/($36-$6) =$ 4,320/$30 = 144 sweat shirts	144 Units
Break even point in dollar sales	= 144*$ 36 =$ 5,184	$ 5,184