Krait Products sells camping equipment. One of the companys products, a camp lantern, sells for $100 per unit. Variable expenses are $70 per lantern, and fixed expenses associated with the lantern total $142,800 per month.

Required:

1. Compute the companys break-even point in number of lanterns and in total sales dollars.

2. If the variable expenses per lantern increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.)

multiple choice

Higher

Lower

3. At present, the company is selling 8,925 lanterns per month. The sales manager is convinced that a 5% reduction in the selling price will result in a 20% increase in the number of lanterns sold each month. Prepare two contribution format income statements: one under present operating conditions, and one as operations would appear after the proposed changes. Show both total and per-unit data on your statements. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

4. At present, the company is selling 8,925 lanterns per month. The sales manager is convinced that a 5% reduction in the selling price will result in a 20% increase in the number of lanterns sold each month. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income of $72,600 per month? (Do not round intermediate calculations.)