Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

BC Mountain Boots Ltd. is thinking of making a specialty hiking boot for children. The initial research has determined that the boot could sell for

BC Mountain Boots Ltd. is thinking of making a specialty hiking boot for children. The initial research has determined that the boot could sell for $175. Fixed manufacturing overhead is $136,750 per month. Fixed selling costs are $25,200 per month. Variable costs to manufacture are estimated as follows: Direct materials -$17.50 Direct labour -5.16 Manufacturing overhead- 1.21 Variable selling cost is estimated at 3.5% of sales. Required: a) Calculate the break-even point in units and in dollars. 4 marks b) Calculate the new break-even point in units and sales dollars for each of the following independent situations: i)Variable manufacturing costs increased by 50%. ii)Fixed manufacturing overhead costs increased by 15% and variable manufacturing costs increased by 60%, except for direct materials, which doubled in price due to a problem with importing leather. Variable selling cost increased to 4% of sales. iii)The estimated selling price was overestimated, and the actual price is $120. c)Using the revised estimates from part b) iii) as the best estimate, what is the margin of safety percentage if the company thinks it will sell 2,500 units per month

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting, The Financial Chapters

Authors: Tracie Miller Nobles

12th Edition

013449041X, 9780134490410

More Books

Students also viewed these Accounting questions