Jim Sandalwood has recently opened The Sandal Hut in Brisbane, Australia, a stor

Question

Jim Sandalwood has recently opened The Sandal Hut in Brisbane, Australia, a store that specializes in fashionable sandals. Jim has just received a degree in business and he is anxious to apply the principles he has learned to his business. In time, he hopes to open a chain of sandal shops. As a first step, he has prepared the following analysts for his new store: How many pairs of sandals must be sold to break even? What does this represent in total dollar sales? How many pairs of sandals must be sold to earn a $1, 600 target profit for the first year?

Explanation / Answer

Break even point in sales = Total fixed expenses / Selling price - Variable cost per unit

Break even point in sales = 49600 / 2-1.2 = 62000

Break even point in dollars = 62000*2 = 124000

Question B:

Target profit = 1600

Target profit = contribution margin - Fixed expenses

1600 = 0.8*x - 49600

x = 51200/0.8 = 64000

At 64000 unit sales, can return 1600$ profit.

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