Cigars for Enthusiasts Inc., a start-up company, founded by Cuauhtemoc Meza and Lars Knutson following their respective tours with the United States Army, is off to a great start. Both gentlemen enjoy the premium products themselves and expect their initial first year as an online distributor of premium cigars and accessories to bust records for start-ups. Cigars for Enthusiasts expects to maintain the same inventories at the end of the year as at the beginning of the year. The estimated fixed costs for the year are $ 288,000 and the estimated variable costs per unit are $ 14. It is expected that 60,000 units will be sold at a price of $ 20 per unit. Maximum sales within the relevant range are 70,000 units. What is (a) the contribution margin ratio and (b) the unit contribution margin? Determine the break-even point in units. Construct a cost-volume-profit chart, indicating the break-even point. Construct a profit-volume chart, indicating the break-even point. What is the margin of safety?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Cigars for Enthusiasts Inc., a start-up company, founded by Cuauhtemoc Meza and Lars Knutson following their respective tours with the United States Army, is off to a great start. Both gentlemen enjoy the premium products themselves and expect their initial first year as an online distributor of premium cigars and accessories to bust records for start-ups.
Cigars for Enthusiasts expects to maintain the same inventories at the end of the year as at the beginning of the year. The estimated fixed costs for the year are $ 288,000 and the estimated variable costs per unit are $ 14. It is expected that 60,000 units will be sold at a price of $ 20 per unit. Maximum sales within the relevant range are 70,000 units.
- What is (a) the contribution margin ratio and (b) the unit contribution margin?
- Determine the break-even point in units.
- Construct a cost-volume-profit chart, indicating the break-even point.
- Construct a profit-volume chart, indicating the break-even point.
- What is the margin of safety?
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