Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $205,800 per month.
Required 3: At present, the company is selling 15,000 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.
Contribution Format Income Statement | ||
Under present operating conditions | ||
Sales revenue (15000*140) | $ 2,100,000 | |
Less: | Variable cost (15000*98) | $ 1,470,000 |
Contribution margin | $ 630,000 | |
Less: | Fixed cost | $ 205,800 |
Net income | $ 424,200 | |
Contribution Format Income Statement | ||
Under proposed changes | ||
Sales revenue (18750*126) | $ 2,362,500 | |
Less: | Variable cost (18750*98) | $ 1,837,500 |
Contribution margin | $ 525,000 | |
Less: | Fixed cost | $ 205,800 |
Net income | $ 319,200 | |
Revised selling price (140-(140*10%)) | $ 126 | |
Revised quantity sold (15000+(15000*25%)) | 18,750 |
Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $140 per u...
Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $205,800 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? Break-even point in unit sales Break-even point in dollar sales 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in...
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 $145,200 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 fixed...
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 $158,400 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 fixed...
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Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $184,800 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...