Question

Puma produces portable soccer goals. Its total fixed cost for the following year is expected to be $490,000, while its variable cost per unit is expected to be $33 per soccer goal. Assume the selling price is $40 per soccer goal. (This question doesn’t require a text box with written answers, but you need to clearly label your answers to parts a and b.)

a. Calculate the contribution margin per unit (the contribution to profit from each soccer goal sold).

b. Calculate the number of soccer goals that RC Sport needs to sell to break even (to make zero profit).

c. Construct a table with Number of units sold, Total Revenue, Total Cost, and Profit in its 4 columns. Fill the units sold column with the following values: 0, 10000, 20000, 30000, 40000, 50000, 60000, 70000, 80000, 90000, and 100000. Fill in the remaining 3 columns with formulas and cell references, calculating the correct values (use dollar signs to lock cell references and copy from the first row to the other rows of the table). Insert two Excel Charts (select the Line type), one showing the number of units (x) and profit (y), the other showing number of units (x), Total Revenue (y1), and Total Cost (y2). Use labels in your charts and make them look good for full credit!

Answer 1

Part a.

Contribution Margin per unit = Selling Price per unit - Variable Cost per Unit

= 40 -33 = $ 7 per unit

Part b.

Number of soccer goals to sell to break even = Total Fixed Cost / Contribution Margin per unit

= $ 490,000 / $ 7 = 70,000 Units

Part c.

Number of Units Sold	Total Revenue	Total Cost	Profit /(Loss)
0	$                       -	$      490,000.00	$ (490,000.00)
10000	$      400,000.00	$      820,000.00	$ (420,000.00)
20000	$      800,000.00	$ 1,150,000.00	$ (350,000.00)
30000	$ 1,200,000.00	$ 1,480,000.00	$ (280,000.00)
40000	$ 1,600,000.00	$ 1,810,000.00	$ (210,000.00)
50000	$ 2,000,000.00	$ 2,140,000.00	$ (140,000.00)
60000	$ 2,400,000.00	$ 2,470,000.00	$    (70,000.00)
70000	$ 2,800,000.00	$ 2,800,000.00	$                     -
80000	$ 3,200,000.00	$ 3,130,000.00	$      70,000.00
90000	$ 3,600,000.00	$ 3,460,000.00	$    140,000.00
100000	$ 4,000,000.00	$ 3,790,000.00	$    210,000.00

Profit /(Loss) (- $300,000.00 $200,000.00 $100,000.00 $- $(100,000.00) $(200,000.00) $(300,000.00) $(400,000.00) $(500,000.00) $(600,000.00) 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 o Profit /(Loss) ) Number of Units

$4,500,000.00 $4,000,000.00 $3,500,000.00 " $3,000,000.00 u $2,500,000.00 n $2,000,000.00 $1,500,000.00 $ $1,000,000.00 $500,000.00 $- -Total Revenue -Total Cost + 0 90000 100000 10000 20000 30000 40000 50000 60000 70000 80000 Number of Units