Question

Answer these following questions: 1. Bridal Shoppe sells wedding dresses. The cost of each dress is comprised of the following: Selling price of $500 and variable (flexible) costs of $200. Total fixed (capacity-related costs for Bridal Shoppe are $90,000. What is the contribution margin per dress a. $500 b. $300 c $600 d. none of these 2. Bridal Shoppe sells wedding dresses. The cost of each dress is comprised of the following: Selling price of $500 and variable (flexible) costs of $200. Total fixed (capacity-related) costs for Bridal Shoppe are $90,000. How many dresses need to be sold to make $60,000 profit a. 1000 b. 500 C. 300 d. 900 3. Janet sells a product for $6.25. The variable costs are $3.75. Janet's break-even units are 35,000. What is the current sales price is $25 per unit and the current variable cost is $17 per unit. Fixed costs are $40,000. If the sales price is increased by $2, and all other costs remain unchanged, the break-even point in units will: increase by 1,000 units b. decrease by 1,000 units C. decrease by 2,000 units d. decrease by 119 units (rounded to nearest unit) 4. PNG electric company manufactures a number of electric products. Rechargeable light is one of the PNG's products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. Monthly sales are 8,000 rechargeable lights. What is the break even point in units? a. 10,000 b. 5,000 c. 7,000 d. Cannot be determined

Answer 1

Answer- 1)- The contribution margin per dress = $300 per dress.

Explanation- Contribution margin per dress = Selling price per dress- Variable cost per dress

= $500-$200

= $300

2)- No. of dresses need to be sold to make $60000 profit = 500 dresses.

Explanation- No. of dresses need to be sold to earn target profit = (Fixed costs+ Target profit)/ Contribution margin per dress

= ($90000+$60000)/ $300 per dress

= 500

3)- The break even point in units will decrease by 1000 units(ie- 5000 units-4000 units).

Explanation Current break even point in units =Fixed costs/Contribution margin per unit

= $40000/ ($25 per unit+$2 per unit)-$17 per unit

= 4000 units

Old break even points in units = = $40000/ ($25 per unit-$17 per unit)

= 5000 units

4)- The break even point in units is = 5000 units.

Explanation- Break even point in units =Fixed costs/Contribution margin per unit

= $270000/ ($180 per unit-$126 per unit

= 5000 units