Reveen Products sells camping equipment. One of the company%u2019s products, a c

Question

Reveen Products sells camping equipment. One of the company%u2019s products, a camp lantern, sells for $100 per unit. Variable expenses are $70 per lantern, and fixed expenses associated with the lantern total $132,000 per month.

Compute the company%u2019s break-even point in number of lanterns and in total sales dollars. (Omit the "$" sign in your response.)

If the variable expenses per lantern 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.)

At present, the company is selling 10,000 lanterns per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. (Input all amounts as positive values except losses which should be indicated by a minus sign.Omit the "$" sign in your response.)

Present
10,000 lanterns

Proposed
lanterns

Refer to the data in (3) above. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income of $72,000 per month? (Round your answer to the nearest whole number.)

.

Reveen Products sells camping equipment. One of the company%u2019s products, a camp lantern, sells for $100 per unit. Variable expenses are $70 per lantern, and fixed expenses associated with the lantern total $132,000 per month.

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Number of Lanterns = Fixed Cost/Contribution Margin Per Unit = 132000/(100-70) = 4400 Lanterns

Total Sales Dollars = 4400*100 = 440000

Part 2:

Higher Break Even Point

Part 3:

Part 4:

Sales = Fixed Cost + Desired Profit/Contribution Marging Per Unit = (132000 + 72000)/20 = 10200 lanterns

Thanks.

Present
10000 Lanterns Proposed (10000*(1+.25))
Total Per Unit Total Per Unit Sales 1000000 100 1125000 90 Variable Cost 700000 70 875000 70 Contrbution 300000 30 250000 20 Fixed Costs 132000
132000
Net Operating Income 168000
118000

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.