The Body Shop Equipment Company sells a small, relatively lightweight multipurpose exercise machine. This machine sells for $700.A recent cost analysis shows that The Body Shop’s cost structure for the coming year is as follows:

Required: (1) Draw a graph that clearly shows

(a) total fixed cost,

(b) total cost,

(c) total sales revenue, and

(d) total contribution margin as the sales volume of ex- ercise machines increases. Locate the break-even point on the graph. (2) Compute the break-even point in number of machines.
(3) How many machines must the Body Shop sell to earn $30,000 of profit per year?
(4) How much profit would be earned at a sales volume of $420,000? (5) Sean McLean, the owner of the Body Shop Equipment Company, is consid- ering traveling a circuit of gyms and fitness centers around the United States each year to demonstrate the exercise machine, distribute informa- tion, and obtain sales contracts. He estimates that this will cost about $6,000 per year. How many additional exercise machines must the company sell per year to cover the cost of this effort?

Transcribed Image Text:

Variable cost per unit....... Total annual fixed costs. 325 125,000