Question

Blossom Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $50 throughout the country to loyal alumni of over 3,500 schools. Blossom's variable costs are 40% of sales; fixed costs are $118,000 per month

Answer 1

Selling price per unit = $50

Variable cost = 45% of selling price per unit

= 50 x 45%

= $22.50 per unit

Increase in fixed cost = $15,000 per month

Increase in selling price = 10%

Current fixed cost = $118,000 per month

New fixed cost = 118,000+15,000

= $133,000 per month

Annual fixed cost = Monthly fixed cost x 12

= 133,000 x 12

= $1,596,000

New Selling price per unit = 50+50 x 10%

= 50+5

= $55

Contribution margin per unit = New Selling price per unit - Variable cost per unit

= 55-22.50

= $32.50

Contribution margin ratio = Contribution margin per unit/ New Selling price per unit

= 32.50/55

= 59.09%

Break even sales in dollars= New fixed cost/ Contribution margin ratio

= 1,596,000/59.1%

= $2,704,626

Break even sales

$2,704,626

Kindly comment if you need further assistance. Thanks‼!