Joanne sells a single product, Fortune Crystals, at the local markets and over the internet. Estimated data relating to 2013 is:
Annual sales ..............................................2500 crystals
Selling price per crystal ................................. $30
Purchase price per crystal ............................... $8
Annual fixed marketing costs ........................ $2000
Variable marketing costs per crystal .................. $3
Annual fixed administration costs ....................$9500
Required:
a) Calculate total fixed costs and unit contribution margin per crystal.
b) Calculate the breakeven point in units for 2013.
c) Calculate the number of crystals that Joanne would need to sell to make a profit of $20 000 for the year.
d) If Joanne can buy the Fortune Crystals for less than the current purchase price will the breakeven point increase or decrease? Explain the reason for your answer.
e) State two assumptions underlying cost-volume-profit analysis.