Raven Spahr is evaluating a business opportunity to sell premium car wax at vintage car shows. The

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Raven Spahr is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Raven can buy the premium wax at a wholesale cost of $32 per tub. She plans to sell the premium wax for $62 per tub. She estimates fixed costs such as travel costs, booth rental cost, and lodging to be $600 per car show.


Requirements
1. Determine the number of tubs Raven must sell per show to break even.
2. Assume Raven wants to earn a profit of $900 per show.
a. Determine the sales volume in units necessary to earn the desired profit.
b. Determine the sales volume in dollars necessary to earn the desired profit.
c. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b.
3. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in sales dollars, in units, and as a percentage.

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Managerial Accounting

ISBN: 9780137858514

7th Edition

Authors: Karen W. Braun, Wendy M. Tietz

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