he business is very competitive, however, and Bubba, the owner, has re retain customers who otherwise might go to other western wear stores he management of certain aspects of the business more difficult, such a e. es costs $ 80.00 29.50 25.50 $ 55.00
he business is very competitive, however, and Bubba, the owner, has re retain customers who otherwise might go to other western wear stores he management of certain aspects of the business more difficult, such a e. es costs $ 80.00 29.50 25.50 $ 55.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A-3
![Problem 9-37 (Algo) CVP Analysis; Strategy [LO 9-1, 9-2, 9-3]
Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat
has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission
to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth
at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and
courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in
sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring
and training new salespeople.
Sales price
Per unit variable expenses
Purchase cost
Sales commissions
Total per unit variable costs
Total annual fixed expenses
Advertising
Rent
Salaries
Total fixed expenses
Required:
1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars.
2. If Bubba's sells 33,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income
statement.
3. If Bubba's sells 46,000 hats, what is its margin of safety (MOS) in dollars and MOS ratio?
4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $286,500 annually. What would be
the new breakeven point in units? What would be the before-tax income or loss if 33,000 hats are sold with the new salary plan?
Required 1 Required 2
Complete this question by entering your answers in the tabs below.
Required 3
Before-tax income or loss
$ 80.00
29.50
25.50
$ 55.00
Contribution Income Statement
$ 237,500
218,000
343,750
$ 799,250
If Bubba's sells 33,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income
statement.
$
Required 4
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcaec1dea-b88f-4936-8182-9b8e76069df7%2F304c1a3e-d128-420e-b90c-d51cc11af942%2Fk7d0zom_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 9-37 (Algo) CVP Analysis; Strategy [LO 9-1, 9-2, 9-3]
Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat
has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission
to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth
at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and
courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in
sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring
and training new salespeople.
Sales price
Per unit variable expenses
Purchase cost
Sales commissions
Total per unit variable costs
Total annual fixed expenses
Advertising
Rent
Salaries
Total fixed expenses
Required:
1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars.
2. If Bubba's sells 33,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income
statement.
3. If Bubba's sells 46,000 hats, what is its margin of safety (MOS) in dollars and MOS ratio?
4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $286,500 annually. What would be
the new breakeven point in units? What would be the before-tax income or loss if 33,000 hats are sold with the new salary plan?
Required 1 Required 2
Complete this question by entering your answers in the tabs below.
Required 3
Before-tax income or loss
$ 80.00
29.50
25.50
$ 55.00
Contribution Income Statement
$ 237,500
218,000
343,750
$ 799,250
If Bubba's sells 33,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income
statement.
$
Required 4
0
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