Outback Outfitters sells recreational equipment One of the company\'s products,
ID: 2569591 • Letter: O
Question
Outback Outfitters sells recreational equipment One of the company's products, a small camp stove, sells for $90 per unit Variable expenses are $63 per stove, and fixed expenses associated with the stove total $118,800 per month 1. Compute the company's break-even point in unit sales and in dollar sales. Break-Even Point Number of stoves Total sales dollars 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) O Higher break-even point O Lower break-even point 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 Outback Outfitters Present 9,000 Stoves Stoves Total Per unit Total Per unit 4. Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to yield a minimum net operating income of $76,000 per month? (Round up your answer to the nearest whole number.)Explanation / Answer
1. Selling price per unit = 90
Variable cost per unit = 63
Contribution margin per unit = Selling price per unit - Variable cost per unit
= 90 - 63 = 27
Fixed costs = 118,800
Breakeven point in units = Fixed costs / Contribution margin per unit
= 118,800 / 27 = 4,400 units
Break even point in dollars = Fixed costs / (Contribution margin per unit - Selling price per unit)
= 118,800 / (27/90) = 396,000
2. If the variable expsneses per stove increrease as a percentage of the selling price, it will result in a Higher break-even point.
3. Outback outfitters
4. No of units to be sold = (Fixed costs + Desired income) / (selling price - variable cost)
= (118,800 + 76,000) / (81 - 63)
= 10,822 units
No of stoves to be sold = 10,822.
Break even point No of stoves 4,400 Total sales dollars 396,000Related Questions
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