Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $110 per unit. Variable expenses are $77 per stove, and fixed expenses associated with the stove total $151,800 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 9,000 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 $76,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 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.) OHigher break-even point OLower break-even point
Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $110 per unit. Variable expenses are $77 per stove, and fixed expenses associated with the stove total $151,800 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 9,000 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 $76,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 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.) OHigher break-even point OLower break-even point
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $110 per unit. Variable
expenses are $77 per stove, and fixed expenses associated with the stove total $151,800 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 9,000 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 $76,000
per month?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3 Required 4
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.)
OHigher break-even point
Lower break-even point
< Required 1
Required 3 >
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