Andersonis evaluating a business opportunity to sell

premiumcarwax at vintage car shows. The wax is sold in 64-ounce tubs. Kevin

can buy the premiumwax at a wholesale cost of $32 per tub. He plans to sell the

premiumwax for $62 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be

$600 per car show.

Read the

requirements ...see comments below please:)-Requirements 1 & 2:)

.

Requirement 1. Determine the number of tubs Kevin must sell per show to break even.

Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach.

(Fixed expenses+Operating income) /Contribution margin per unit=Sales in units

Kevin must sell____?tubs per show to break even.

Requirement 2a. Determine the sales volume in units necessary to earn the desired profit assuming Kevin

wants to earn a profit of $900 per show.

Kevin must sell____?tubs per show to earn a profit of $900 per show.

b. Determine the sales volume in dollars necessary to earn the desired profit assuming Kevin

wants to earn a profit of $900 per show.

Begin by identifying the formula to compute the sales volume in dollars necessary to earn the desired profit.

Sale price per unit x Target sales in units=Target sales in dollars

Kevin must achieve sales of $______?to earn a profit of $900 per show.

c. Using the contribution margin format, add an income statement (condensed version) to confirm your answers to parts a and b.

Condensed Income Statement

Sales

Less:

Variable costs

Contribution margin

Less:

Fixed costs

Net income (loss)

Requirement 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, units, and as a percentage.

Begin by identifying the formula to compute the margin of safety in dollars.

Target sales in dollars - Break even sales in dollars=Margin of safety in dollars

The margin of safety in dollars is $______.

Now identify the formula to compute the margin of safety in units

Target sales in units - Break even sales in units=Margin of safety in units

The margin of safety in units is______units.

Now identify the formula to compute the margin of safety as a percentage.

Margin of safety in dollars /Target sales in dollars= Margin of safety as a percentage of target sales

The margin of safety as a percentage of target sales is______%