Super Sales Company is the exclusive distributor for a revolutionary bookbag. Th

Question

Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $36 per unit and has a CM ratio of 31%. The company’s fixed expenses are $111,600 per year. The company plans to sell 11,000 bookbags this year.

What are the variable expenses per unit? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

What is the break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your answers to the nearest whole number. Omit the "$" sign in your response.)

What sales level in units and in sales dollars is required to earn an annual profit of $55,800? (Do not round intermediate calculations. Round your answers to the nearest whole number. Omit the "$" sign in your response.)

Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses by $4.70 per unit. What is the company’s new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your final answers to the nearest whole number. Omit the "$" sign in your response.)

Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $36 per unit and has a CM ratio of 31%. The company’s fixed expenses are $111,600 per year. The company plans to sell 11,000 bookbags this year.

Explanation / Answer

1) Variable expenses per units

=(Sales price*(100%-CM%))= ($36*(100%-31%))

=($36*69%)

=24.84

2 a).Break even point(in units)=Fixed Cost/contribution per unit(sales-Variable cost )

                                            =111,600/(36-24.84)

                                            =111,600/11.16

                                            =10,000units

Break even point in sales =Fixed cost/contribution(in percentage)

                                             =111,600/31%

                                             =360,000

b)Sales level in units = (Fixed cost+Profit to be earned)/contribution per unit

                                  =(111,600+55,800)/11.16

                                  =15,000

Sales Level in dollars=15000*36=$540,000

C)By Reducing variable cost,Increase in contribution will be 11.16+4.70=15.86

New break even point in units=Fixed Cost/contribution per unit=111,600/15.86=7037

New break even point in sales dollars=New Break even point in units*sales per unit=7036.57*36=$253,317

2)

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