EXERCISE 2-17 Break-Even and Target Profit Analysis LO2-4, LO2-5, LO2-6 Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated with the stove total $108,000 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 8,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating con- ditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements. bonlops . Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to attain a target profit of $35,000 per month?
EXERCISE 2-17 Break-Even and Target Profit Analysis LO2-4, LO2-5, LO2-6 Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated with the stove total $108,000 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 8,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating con- ditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements. bonlops . Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to attain a target profit of $35,000 per month?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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EXERCISE 2-17 Break-Even and Target Profit Analysis LO2-4, LO2-5, LO2-6
Outback Outfitters sells recreational equipment. One of the company's products, a small camp
stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated
with the stove total $108,000 per month.
Required:
What is the break-even point in unit sales and in dollar sales?
If the variable expenses per stove increase as a percentage of the selling price, will it result
in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain
unchanged.)
1.
2.
going on holvos odr sisw
3. At present, the company is selling 8,000 stoves per month. The sales manager is convinced
that a 10% reduction in the selling price would result in a 25% increase in monthly sales of
stoves. Prepare two contribution format income statements, one under present operating con-
ditions, and one as operations would appear after the proposed changes. Show both total and
per unit data on your statements.
bunlupa
4.
Refer to the data in (3) above. How many stoves would have to be sold at the new selling price
to attain a target profit of $35,000 per month?
fiau ni tring nova-odori ei led W
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