Question

Sandhill Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $47 throughout the country to loyal alumni of over 2,900 schools. Sandhill's variable costs are 41% of sales: fixed costs are $118,000 per month. X Your answer is incorrect. Assume that variable costs increase to 47% of the current sales price and fixed costs increase by $13,600 per month. If Sandhill were to raise its sales price by 10% to cover these new costs, what would be the new annual breakren point in sales dollars? (Round sales price to 2 decimal places, es. 52.75 and final answer to decimal places, eg. 5,275.) Breakeven sales SL 2277966

Answer 1

Calculation of Current Break-Even Point-

Break even Point is that level of sales at which there is no profit & no loss.

Formula of Break even Point = Fixed Cost/(Sales cost per unit - variable cost per unit)

Where Fixed Cost = 118000 per month

sales cost per unit = $ 47

variable cost per unit = 41% of sales, which would become 47*41% = 19.27

Put all values in above formula

BEP = 118000/(47-19.27)

= 118000/27.73

= 4255.32 units

BEP in values = 4255.32*47

= $ 200000

Calculation of New Break Even Point -

variable cost increases to 47% of current sales price per unit which means variable cost per unit = current sales price *47%

so variable cost per unit = 47*47% (because current sales price = 47)

= 22.09

New Fixed cost = 118000+13600

= 131600

New sales price = Current sales price + Current sales price*10%

= 47 + 47*10%

= 47+4.7

= 51.7

New Break Even Point = New Fixed Cost /(New Sales price per unit - New variable cost per unit)

= 131600/(51.7-22.09)

= 131600/29.61

= 4444.44 Units

New Break Even Point = 4444.44*51.7

= $ 229777.8

Please check with your answer and let me know.