BIRKENSTOCK CVP PROBLEM: Birkenstock is considering adding a new Big Buckle sandal to its current product offerings. Birkenstock expects to price the shoes at $135 per pair. The variable costs to produce one pair are estimated to be: $20 per pair direct materials; $25 per pair direct labor; $5 per pair shipping costs and $5 per pair miscellaneous overhead. The fixed costs for this line of shoes are: $50,000 advertising/promotion; $150,000 manufacturing plant manager salary; $300,000 depreciation expense on manufacturing equipment; and $50,000 other miscellaneous fixed costs.

1)How many pairs of sandals does Birkenstock need to sell to break even?

	10,000 pairs
	4,074 pairs
	3,875 pairs
	6,875 pairs

2) What is "breakeven sales dollars" for Birkenstock?

	$945,160
	$523,125
	$928,125
	$550,000

3) If Birkenstock's target profit for the year for this line of sandals is $2,000,000, how many pairs does the company need to sell to reach this target profit?

	31,875 pairs
	43,185 pairs
	25,000 pairs
	18,125 pairs

4) If Birkenstock's best guess is that they will sell 40,000 pairs of this line of sandals in the current year, what is the company's expected profit for the year?

	$2,650,000
	$5,400,000
	$2,500,000
	$3,200,000

5) POSSIBLE ALTERNATIVE PRICING: Birkenstock's marketing team estimates that if they increase the product's price to $150 per pair, they will sell 20% fewer pairs of Big Buckle sandals.

a) What is Birkenstock's expected profit if they increase the selling price?

	$3,410,000
	$3,040,000
	$3,250,000
	$2,490,000

b) if Birkenstock wants to maximize expected profit, should they continue to price the sandals at $135 per pair or $150 per pair?

	Birkenstock should price the sandals at $150 per pair.
	Birkenstock should price the sandals at $135 per pair.