Question

Problem (10 points). At the beginning of each year, the accounting department at Washington Fur Company must determine certain amounts for management concerning its profit plan for the coming year. The company manufactures and sells imitation fur coats. Each coat sells for an average price of $500. Variable costs per coat are $320. Total fixed costs for the year are estimated to be $240,000. REQUIRED: (1) (2) Compute the break even point in number of coats. Round your answer up to the next whole unit. Compute the break even point in dollars of sales. Round your answer up to the next whole dollar Compute the break even point in coats if the selling price decreases to $450 per coat, fixed costs increase by $80,000, and variable costs decrease by S20 per coat. Round your answer up to the next whole unit. (3)

Answer 1

Answers

• Requirement 1 with working

A	Sale price per unit	$500
B	Variable cost per unit	$320
C = A-B	Contribution margin per unit	$180
D	Fixed Cost	$240,000
E = D/C	Break even point in number of coats	1,333	coats = Answer

• [2]

A	Sale price per unit	$500
B	Variable cost per unit	$320
C = A-B	Contribution margin per unit	$180
D = (C/A) x 100	CM Ratio	36%
E	Fixed Cost	$240,000
F = E/D	Break even point in sales dollars	$666,667	Answer

• [3]

A	Sale price per unit	$450
B	Variable cost per unit	$300
C = A-B	Contribution margin per unit	$150
D	Fixed Cost	$320,000
E = D/C	Break even point in number of coats	2,133	coats = Answer