E6-6 (Algo) Identifying Break-Even Point, Analyzing How Price Changes Affect Profitability; Calculating Margin of Safety, Target Profit [LO 6-1, 6-2, 6-3, 6-4]

Sandy Bank, Inc., makes one model of wooden canoe. and, the information for it follows:

Number of canoes produced and sold		550		750		900
Total costs
Variable costs	$	112,750	$	153,750	$	184,500
Fixed costs	$	148,500	$	148,500	$	148,500
Total costs	$	261,250	$	302,250	$	333,000
Cost per unit
Variable cost per unit	$	205.00	$	205.00	$	205.00
Fixed cost per unit		270.00		198.00		165.00
Total cost per unit	$	475.00	$	403.00	$	370.00

Sandy Bank sells its canoes for $375 each.

Required:

1. Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars.

2. If Sandy Bank sells 1,600 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.)

3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $130,000 profit.