Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $130 per unit. Variable expenses are $91 per stove, and fixed expenses associated with the stove total $191,100 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 15,000 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 At present, the company is selling 15,000 stoves per month. The sales manager is convinced that a 10% reduct selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income one under present operating conditions, and one as operations would appear after the proposed changes. Contribution Income Statement Outback Outfitters Stoves Present Stoves - Proposed 15,000 Total Per unit Total Per unit 0 $ 0 0 $ 0 $ 0 $ 0
Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $130 per unit. Variable expenses are $91 per stove, and fixed expenses associated with the stove total $191,100 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 15,000 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 At present, the company is selling 15,000 stoves per month. The sales manager is convinced that a 10% reduct selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income one under present operating conditions, and one as operations would appear after the proposed changes. Contribution Income Statement Outback Outfitters Stoves Present Stoves - Proposed 15,000 Total Per unit Total Per unit 0 $ 0 0 $ 0 $ 0 $ 0
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 $130 per unit. Variable expenses are $91 per stove, and fixed expenses associated with the stove total
$191,100 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 15,000 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?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Required 4
At present, the company is selling 15,000 stoves per month. The sales manager is convinced that a 10% reduct
selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income
one under present operating conditions, and one as operations would appear after the proposed changes.
Outback Outfitters
Contribution Income Statement
Stoves - Present
Stoves - Proposed
15,000
Total
Per unit
Total
Per unit
0
$
0
0
$
0
$
0
< Required 2
$
0
Required 4 >
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Step 1: Define target profit
VIEWStep 2: 1) The calculation of the break even point in units and dollars is as follows-
VIEWStep 3: 2) Explanation
VIEWStep 4: 3) The calculation of net operating income is as follows-
VIEWStep 5: 4) The calculation of the units to be sold to earn 71000 profit
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