Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
a Recall from Summary Problem 1 that Fleet Foot buys hiking socks for 56 a them for $10. Monthly fixed costs are $10,000 (for sales
a Recall from Summary Problem 1 that Fleet Foot buys hiking socks for 56 a them for $10. Monthly fixed costs are $10,000 (for sales volumes between 0 and 12,000 pairs), resulting in a breakeven point of 2,500 units. Assume that Fleet Foot has been selling 8,000 pairs of socks per month. Requirements 1. What is Fleet Foot's current margin of safety in units, in sales dollars, and as a percentage? Explain the results. 2. At this level of sales, what is Fleet Foot's operating leverage factor? If volume declines by 25% due to increasing competition, by what percentage will the company's operating income decline? 3. Competition has forced Fleet Foot to lower its sales price to $9 a pair. How will this affect Fleet's breakeven point? 4. To compensate for the lower sales price, Fleet Foot wants to expand its product line to include men's dress socks. Each pair will sell for $7.00 and cost $2.75 from the supplier. Fixed costs will not change. Fleet expects to sell four pairs of dress socks for every one pair of hiking socks (at its new $9 sales price). What is Fleet's weighted- average contribution margin per unit? Given the 4:1 sales mix, how many of each type of sock will it need to sell to breakeven? 16C
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started