E6-6 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

450

650

800

Total costs

Variable costs

$

65,250

$

94,250

$

116,000

Fixed costs

$

280,800

$

280,800

$

280,800

Total costs

$

346,050

$

375,050

$

396,800

Cost per unit

Variable cost per unit

$

145.00

$

145.00

$

145.00

Fixed cost per unit

624.00

432.00

351.00

Total cost per unit

$

769.00

$

577.00

$

496.00

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. (Do not round intermediate calculations. Round your final answers to nearest whole number.)

New Break-Even Units		Canoes
Break-Even Sales Revenue

2. If Sandy Bank sells 900 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) (Round your answers to the nearest whole number.)

Margin of Safety
Percentage of Sales		%

3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $110,000 profit. (Round your answer to the nearest whole number.)

Target Sales Units

Canoes