16.

value: 5.78 points

Exercise 5-16 Break-Even and Target Profit Analysis [LO3, LO4, LO5,LO6]

Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $36 per unit and has a CM ratio of 35%. The companys fixed expenses are $252,000 per year. The company plans to sell 21,000 bookbags this year.

Required:
1.	What are the variable expenses per unit? (Round your answer to 2 decimal places.)

Variable expenses

$

2.	Use the equation method:

a.	What is the break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Break-even point in units
Break-even point in sales dollars	$

b.	What sales level in units and in sales dollars is required to earn an annual profit of $63,000? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Sales level in units
Sales level in dollars	$

c.

Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses by $3.90 per unit. What is the companys new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)

New break-even point in units
New break-even point in sales dollars	$

3.	Repeat (2) above using formula method.

a.	What is the break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Break-even point in units
Break-even point in sales dollars	$

b.	What sales level in units and in sales dollars is required to earn an annual profit of $63,000? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Sales level in units
Sales level in dollars	$

c.	Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses by $3.90 per unit. What is the companys new break-even point in units and in sales dollars? (Round your answers to the nearest whole number.)

New break-even point in units
New break-even point in sales dollars	$

rev: 08_06_2013_QC_32661