Golden Gate Novelties (GGN) sells souvenir key chains at the local airport. GGN charges $13.00 per chain. The variable cost for a chain, including the wholesale cost of the chain, packaging, the commission paid to the airport operator, and so on, is $11.40. The annual fixed cost for GGN is $15,120. Required: How many cases must Golden Gate Novelties sell every year to break even? Note: Do not round intermediate calculations. The owner of GGN believes that the company can sell 12,600 chains a year. What is the margin of safety in terms of the number of chains?
Golden Gate Novelties (GGN) sells souvenir key chains at the local airport. GGN charges $13.00 per chain. The variable cost for a chain, including the wholesale cost of the chain, packaging, the commission paid to the airport operator, and so on, is $11.40. The annual fixed cost for GGN is $15,120.
Required:
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How many cases must Golden Gate Novelties sell every year to break even?
Note: Do not round intermediate calculations.
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The owner of GGN believes that the company can sell 12,600 chains a year. What is the margin of safety in terms of the number of chains?
Break even point :— It is the point of production where total cost is equal to total revenue. At this point, profit is equal to zero. At this point, fixed cost is equal to contribution margin. Break-even point in units is calculated by dividing fixed cost by contribution margin per unit. Break-even point in sales revenue is calculated by dividing fixed cost by contribution margin ratio.
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