Question

value: 20.00 points Hunter & Sons sells a single model of meat smoker for use in the home. The smokers have the following price and cost characteristics: Sales price Variable costs Fixed costs $ 79 per smoker 32 per smoker 371,300 per month Hunter & Sons is subject to an income tax rate of 40 percent. Required: a. How many smokers must Hunter & Sons sell every month to break even? Break-even sales in units b. How many smokers must Hunter & Sons sell to earn a monthly operating profit of $70,500 after taxes? Number of units sold References eBook & Resources

Answer 1

a) Breakeven Sales in Units = Fixed cost/ Contribution margin per smoker.

Contribution Margin per smoker = Sales - Variable cost =>$79 - $32 = $47.

Fixed Cost = $371,300.

Breakeven Units => $372,300 / $47 = 7,900 smokers.

b)Sale to earn profit of $70,500 =>( Fixed Cost + Desired Profit)/ Contribution margin per smoker

Contribution Margin per smoker (as computed above)

=> ($371,300 + $70,500)/ $47 = 9,400 Smokers.

If you have any doubts please comment on the answer.