Question

Problem 5-24 Break-Even and Target Profit Analysis [LO5-5, LO5-6] 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 $19.00 each with a minimum order of 320 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 $38.00 each. Hooper would pay the students a commission of $5.00 for each shirt sold. Required: 1. What level of unit sales and dollar sales is needed to attain a target profit of $11,200? 2. Assume that Hooper places an initial order for 320 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 Unit sales needed to attain the target profit sweatshirts Dollar sales needed to attain the target profit 2 Break-even point in unit sales sweatshirts Break-even point in dollar sales

Answer 1

Answers $38 $19 $14. Selling Price of sweat shirt per unit Less: Coff of Sweat Shirt per unit Less: Commision perunit Profit / Contribution per unit Target profit -$11,200 unit sall needed of attain profit ($11,200 /$14) sale price per unit Dollar Sale needed to attain target profit (800X38) | 800 $38 $30,400 2) $ 38 $ 5 selling price percenit Lessi variable cost I Contribution fixed cost at 320 unit (320x$19) $33 $6,080 Break even point in unit saley (6080/33) 184 Break even point in dolar Sales (184x38) $6992 800 $30,400 1) Unit sales needed to attain the Target profit Dollar Sales needed to attain the target Profit (2) Break-even point en unit sales Break-even point in dollar sales 184 $ 6992