Question

outback outfitters sells recreational eauipment

1. What is the break even point in unit sales and in dollar sales?

2. if the variable expenses per stove increase as a percentage of the selling price will it result in a higher or lower break even point?

3. at present the company is selling 13,000 stoves per month. the sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. prepare 2 contribution format income statements one under PRESENT operating conditions and one as operations would appear after the proposed changes

4. refer to the data in reauired 3. how many stoves would have to be sold at the new selling price to attain a target profit of $80,000 per month?

1 Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $110 per unit. Variable expenses are $77 per stove, and fixed expenses associated with the stove total $135,300 per month Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break even point? (Assume that the food expenses remain unchanged) 3. At present, the company is selling 13,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes 4 Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $80,000 per month 001 Complete this question by entering your answers in the tabs below. Regard 1 Required 2 Required 3 Required 4 What is the break even point in unit sales and in dollar sales? Break even point in unit Sales Break-even point in die Reged Required 2 >

Answer 1

Requirement (1) Requirement (2) Higher Break even Point Break even point in unt sales 4100 Break even point in dolar sales $451,000 Working Note : Seling Price Less : Variable cost Contribution Margin Note : Increase in Variable expense as % of sales results in reduction of contribution as % of sales With the decrease in contribution margin, it will result in higher break even point Requirement (3) Outback Fitters Contribution Income Statement Present Proposed 13000 Stoves 16250 Stoves Total Per Unit Total Per Unit Sales $ 1,430,000 $ 110 $ 1,608,750 $ 99 Variable cost $ 1,001,000 $ 77 $ 1,251,250 $ 77 Contribution Margin $ 429,000 $ 33 $ 357,500 $ 22 Fixed Cost $ 135,300 $ 135,300 Net Income $ 293,700 $ 222,200 110 -77 33 Break even in units = Fixed cost/Contrbution margin 135300/33 4100 Requirement (4) Unit sales needed to attain target proft (135300+80000)/22 451000 9786 Units Break even in sales dolars 4100 units x 110 Note : Comment down for any clarifications