Required: a. Based on the information how many pieces of artwork per month would Zane need to sell to break even? Show all workings. b. If Zane wanted to earn a net income (after tax) of $14,700 per month assuming all of the same prices and costs given above, what amount of revenue would he need to make per month? Show all workings.
Having recently graduated with a visual arts degree, Zane is considering starting a new business in this field, selling exotic artwork. He believes he can sell each piece of artwork for an average price of $600. The suppliers of the artwork will be paid a commission of 25% of the price. Artwork will be packed and delivered to the customer. Zane estimates that packing and delivery costs should be about $30 per product.
There will be additional expenses associated with running the store. Rent will be $5,400 per month. Utilities (which it is assumed will not vary from month to month) will be $990 per month. Insurance and other expenses will be $750 per month. He plans to pay himself and one sales assistant salaries of $10,500 per month ($7,500 for himself and $3,000 for his assistant).
The tax rate is assumed by Zane to be 30%.
Required:
a. Based on the information how many pieces of artwork per month would Zane need to sell to break even? Show all workings.
b. If Zane wanted to earn a net income (after tax) of $14,700 per month assuming all of the same prices and costs given above, what amount of revenue would he need to make per month? Show all workings.
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