Question

Managerial & Cost Accounting, 20/FA Nicole Nardecchia & Homework: Chapter 3 Homework Save Score: 0 of 4 pts 10 of 17 (10 complete) HW Score: 47.31%, 47.31 of 100 pts E3-28 (similar to) Question Help line Right Fit Jeans Co. ells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $35 with $25 in variable costs of goods sold. The company has fixed manufacturing costs of $1,175,000 and fixed marketing costs of $450,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%. Read the requirements. Requirement 1. How many jeans must Right Fit sell in order to break even? Select the formula labels, enter the amounts and calculate the breakeven number of pair of jeans. Choose from any list or enter any number in the input fields and then click Check Answer parts remaining Clear All Check Answer

Answer 1

1. Break even point = Fixed cost / Contribution margin per unit

=$1,625,000/$6.5

=250,000 units

Contribution margin per unit = $35-$25-($35×10%)

=$6.5

Fixed cost = Fixed manufacturing cost+ Fixed marketing cost

=$1,175,000+$450,000

=$1,625,000

2.

a. No of jeans = Targeted operating income+ Fixed cost / Contribution margin per unit

=($420,000+$1,625,000)/$6.5

=314,615 units

b.

No of jeans of Target net income =( Targeted operating income+ Fixed cost )/ Contribution margin per unit

=($525,000+$1,625,000)/$6.5

=330,769 units

Operating income = Target net income/ (1- tax rate)

=$420,000/(1-30%)

=$525,000

3.

a contribution margin increased by 10%

Contribution margin per unit =$6.5+10%

=$7.15

No. Of jeans =($525,000+$1,625,000)/$7.15 =300,699 units

b.

Selling price increased by $37.50

New contribution margin per unit =$37.50-$25-(37.50×10%)

=$8.75

Number of jeans =($525,000+$1,625,000)/$8.75

=245,714

c.

Contribution margin per unit =$35-$27-($35×10%)

=$4.5

Fixed cost =($1,175,000×30%)+$450,000

=$802,500

Number of jeans =($525,000+$802,500)/$4.5

=295,000 units