Exercise 5-16 Break-Even and Target Profit Analysis [LO3, LO4,
LO5,LO6]
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Super
Sales Company is the exclusive distributor for a revolutionary bookbag. The
product sells for $43 per unit and has a CM ratio of 38%. The company’s fixed
expenses are $245,100 per year. The company plans to sell 16,000 bookbags
this year.
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Required:
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|
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1.
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What
are the variable expenses per unit? (Round
your answer to 2 decimal places.)
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Variable
expenses
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$
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Variable expense = 26.66
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2.
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Use
the equation method:
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a.
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What
is the break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your
answers to the nearest whole number.)
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Break-even
point in units
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|
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Break-even
point in sales dollars
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$
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Break-even point
in units = 15,000 units
Break-even point in sales dollars = 645,000
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b.
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What
sales level in units and in sales dollars is required to earn an annual
profit of $81,700? (Do not round intermediate
calculations. Round your answers to the nearest whole number.)
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Sales
level in units
|
|
|
Sales
level in dollars
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$
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Sales level in
units = 20,000
Sales level in dollars = 860,000
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c.
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Assume
that through negotiation with the manufacturer the Super Sales Company is
able to reduce its variable expenses by $4.10 per unit. What is the company’s
new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your
final answers to the nearest whole number.)
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New
break-even point in units
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|
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New
break-even point in sales dollars
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$
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New break-even
point in units =
11991
New break-even point in sales dollars = 510625
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3.
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Repeat
(2) above using formula method.
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|
a.
|
What
is the break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your
answers to the nearest whole number.)
|
|
Break-even
point in units
|
|
|
Break-even
point in sales dollars
|
$
|
Break-even point
in units =
15,000 units
Break-even point in sales dollars = 645,000
|
b.
|
What
sales level in units and in sales dollars is required to earn an annual
profit of $81,700? (Do not round intermediate
calculations. Round your answers to the nearest whole number.)
|
|
Sales
level in units
|
|
|
Sales
level in dollars
|
$
|
Sales level in
units = 20,000
Sales level in dollars = 860,000
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c.
|
Assume
that through negotiation with the manufacturer the Super Sales Company is
able to reduce its variable expenses by $3.60 per unit. What is the company’s
new break-even point in units and in sales dollars? (Round your answers to the nearest whole number.)
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|
New
break-even point in units
|
|
|
New
break-even point in sales dollars
|
$
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New break-even point in units =
12292
New break-even point in sales dollars =532826
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