Note: Please provide in excel format (horizontal) Cannon Company produces and se

Question

Note: Please provide in excel format (horizontal)

Cannon Company produces and sells air compressors for $250. The variable costs per unit are $150 plus a sales commission of 10% of the selling price. Total fixed costs consist of $14,000 in fixed overhead and $16,000 in fixed selling and administrative costs.

Required:

1) Compute the contribution margin per unit.
2) Compute the break-even point in units and dollars.
3) How many units must be sold to earn a profit of $60,000?
4) What would be the break-even point in units if the sales commission is reduced to $10 per unit sold?  

Explanation / Answer

Statement showing computations Particulars Amount Sales Price per unit                  250.00 Variable Costs: Variable Costs                     150.00 Commission =250*10%                    25.00 Total Variable Costs =                    175.00 1) Contribution Margin per unit= 250 - 175                    75.00 Total Fixed Costs Fixed Overhead            14,000.00 fixed selling and administrative costs            16,000.00 Total Fixed Costs            30,000.00 2) BEP in units = 30,000/75                  400.00 BEP in $ = 400 *250         100,000.00 3) Desired profit            60,000.00 Desired Fixed Costs            30,000.00 Desired Contribution = 60000 + 30000            90,000.00 Units to be sold = 90,000/75              1,200.00 4) Sales Price per unit                  250.00 Variable Costs: Variable Costs                     150.00 Commission =250*10%                    10.00 Total Variable Costs =                    160.00 Contribution Margin per unit= 250 - 175                    90.00 BEP in units = 30,000/90                  333.33

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