Break-Even and Target Profit Analysis
Super Sales Company is the exclusive distributor for a revolutionary book bag. The product sells for $60 per unit and has a CM ratio of 40%.The company's fixed expenses are $360.000 per year. The company plans to sell 17,000 book bags this year.
Required:
I. What are the variable expenses per unit?
2. Using the equation method:
a.What is the break-even point in units and in sales dollars?
b.What sales level in units and in sales dollars is required to earn an annual profit of $90,000?
c.Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses by $3 per unit. What is the company’s new breakeven point in units and in sales dollars?
3. Repeat (2) above using the formula method:
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