Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $205,800 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? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 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 conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $71,000 per month?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Outback Outfitters sells recreational equipment. One of the company's products, a small
camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed
expenses associated with the stove total $205,800 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? (Assume that the fixed expenses remain
unchanged.)
3. At present, the company is selling 10,000 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 conditions, and one as operations would appear after the proposed
changes.
4. Refer to the data in Required 3. How many stoves would have to be sold at the new
selling price to attain a target profit of $71,000 per month?
Transcribed Image Text:Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $205,800 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? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 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 conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $71,000 per month?
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