Larry Stenback is evaluating a business opportunity to sell grooming kits at dog shows. Larry can buy the grooming kits at a wholesale cost of $32 per set. He plans to sell the grooming kits for $62 per set. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $600 per dog show.
Requirements
1. Determine the number of grooming kits Larry must sell per show to break even.
2. Assume Larry 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 Requirements (a) and (b).
3. Determine the margin of safety between the sales volume at the break-even point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars and units, and as a percentage.