Scott Cole is evaluating a business opportunity to sell grooming kits at dog shows. Scott can buy

Question:

Scott Cole is evaluating a business opportunity to sell grooming kits at dog shows. Scott can buy the grooming kits at a wholesale cost of $29 per set. He plans to sell the grooming kits for $84 per set. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $880 per dog show.
Requirements
1. Determine the number of grooming kits Scott must sell per show to break even.
2. Assume Scott wants to earn a profit of $1,320 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 both sales dollars, units, and as a percentage.
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Managerial Accounting

ISBN: 978-0132890540

3rd edition

Authors: Karen W. Braun, Wendy M. Tietz

Question Posted: