Question

Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to increased market competition, the CFO of Stylish Sitting has grown worried about the firm's upcoming income stream. The CFO asked you to use the company financial information provided below. Sales price $ 76.00 Per-unit variable costs: Invoice cost 40.25 Sales commissions 17.25 Total per-unit variable costs $ 57.50 Total annual fixed costs: Advertising $ 54,300 Rent 76,600 Salaries 224,600 Total annual fixed costs $ 355,500

Answer 1

Contribution margin = $76 - $57.50 = $18.50

Breakeven point in units = $355,500 / $18.50 = 19,216 or 19,217

Breakeven point in dollars = ($355,500 / $18.50) X $76 = $1,460,432