Question

Cathy's Towels sells three items (which it purchases from a supplier): bath towels, hand towels, and washcloths in a 3:3-2 mix (thus, a batch of 8 towels has 3 bath towels, 3 hand towels, and 2 washcloths). Each bath towel sells for $9 and costs $3. each hand towel sells for $7 and costs $4: and each washcloth sells for $2.50 and costs $1. The shop's annual fixed expenses are $318,000, and the income tax rate, t. is 30%. How many bath towels must the firm sell at the breakeven point? (Round per-unit amounts to 2 decimal places; round other Intermediate calculations to nearest whole dollars.) Multiple Choice O 76.800 0 46,800 15,800. O 39,800 0 31,800

Answer 1

Calculation of contribution per unit Bath Towel Hand Towel Wash cloth Sales Price $ 9.00 $ 7.00 $ 2.50 Less: Variable Cost Per unit $ 3.00 $ 4.00 $ 1.00 Contribution Margin per unit $ 6.00 $ 3.00 $ 1.50 Equivalent Contribution margin per unit of wash cloth =$1.5/3*2 =$1 Therefore total contribution per unit = $6 +$3+1 = $10 Break Even Point = Fixed Costs / Contribution per unit Therefore total units need to be sold for break even point =$318000/10 per unit -31800 Units Therefore the LAST option is correct. As per Cherr's policy I am bond to solve first question only. Please do not dislike for not solving second question.