Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sellsfor $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated with the stove total$108,000 per month.Required:1. Compute the break-even point in number of stoves and in total sales dollars.2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher ora 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 a10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Preparetwo contribution format income statements, one under present operating conditions, and one asoperations would appear after the proposed changes. Show both total and per unit data on yourstatements.4. Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to yielda minimum net operating income of $35,000 per month?
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. Compute the break-even point in number of stoves and in total sales dollars.
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 conditions, and one as
operations would appear after the proposed changes. Show both total and per unit data on your
statements.
4. Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to yield
a minimum net operating income of $35,000 per month?
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