Question

usiness opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. of $32 ner tub_He plans to sell the premium wax for $62 ner tub_He estimates fixed costs such as tra * Requirements um -ca þprod 1. Determine the number of tubs Hunter must sell per show to break even. 2. Assume Hunter wants to earn a profit of $900 p a. Determine the sales volume in units necessary to earn the desired profit. b. Determine the sales volume in dollars necessary to earn the desired profit. c. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b. 3. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars, units, and as a percentage. Print Print Done Done and then click neck Answer.

Answer 1

Please refer the solution provided. For any Queries please comment. Both the part have been solved. if any calculation are not clear please comment we will surely help you with the same. Thank you !

Given in question Cost of premium wax $32 Selling price Fixed Costs $600 $62 per tub per tub Per car show Formula for Breakeven point(Per show) Fixed cost/ Contribution per unit Contribution per unit Selling price - Variable cost(i.e. cost of raw material) $62 - $32 $ 30.00 Answer -1 Break even point = $600/$ 30 2 0 Units per show

To earn $ 900 per show of profit, we should add break even sales unit(A) and additional unit required for $900 profit(B) Break even sales unit per show(A) 20 units Answer -2-a Desired profit/ contribution per unit $900/$30 30 units Additional unit required(B) A+B 20+30 50 units Sales volume in $ to earn $900 profit 50 units * $62(Selling price) $ 3,100 Less Income statement Pariculars Sales(A) Cost of raw material(50*32)(B) Contribution(A-B) Fixed costs Net profit Amount($) 3,100.00 -1,600.00 1,500.00 600.00 900.00 Less

Current sales level - Breakeven point Current sales level 100 Margin of safety('MOS') ratio at desired profit of $900(%) 50-20 50 100 = 60% Answer 3 Current sales level - Breakeven point MOS in units 50-20 30 units MOS in $ MOS in units *Selling price 30*62 $ 1,860