Question

Required information The following information applies to the questions displayed below.) Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store: Sales price per pair of sandals Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: Building rental Equipment depreciation Selling Administrative Total fixed expenses $ 5,900 5,900 5,900 21,300 $ 39,000 3. Angie has decided that she must earn a profit of $19,500 the first year to justify her time and effort. How many pairs of sandals must be sold to attain this target profit? Unit sales to attain target profit

Answer 1

Calculate requirement as follows: A Particulars Target Profit (A) Fixed cost (B) Contribution Margin per unit (C) Number of pairs to be sold to earn target profit (A+B)/ C D Amount $ 19,500 $ 39,000 $ 13 4 500 pairs 4 Increase in sales Less: Variable cost Increase in contribution margin Additional cost Incremental Revenue $ $ $ $ $ 26,000 13,000 13,000 9,000 4,000 Calculations: D. 1 3 Particulars Target Profit (A) Fixed cost (B) Contribution Margin per unit (C) Number of pairs to be sold to earn target profit (A+B)/C Amount 19500 39000 =13 =(C2+C3)/C4 pairs 7 4 Increase in sales Less: Variable cost Increase in contribution margin Additional cost Incremental Revenue 26000 =(26000/26) 13 =C7-C8 9000 =C9-C10 11 Note: Increased sales of $26000 means, the number of units sold additionally is $26000/$26, as selling price per unit is $26. For any queries or doubts related to format or any values please post in comment section, I would take that up