Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Outback Outfitters sells recreational equipment. One of the companys products, a small camp stove, sells for $150 per unit. Variable expenses are $105 per stove,

Outback Outfitters sells recreational equipment. One of the companys products, a small camp stove, sells for $150 per unit. Variable expenses are $105 per stove, and fixed expenses associated with the stove total $180,000 per month.

Required:

1. What is the break-even point in unit sales and in dollar sales?

2. If the variable expenses per stove 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.)

3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes.

4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $78,000 per month?

Required 1

What is the break-even point in unit sales and in dollar sales?

Required 2

If the variable expenses per stove 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.)

Required 3

At present, the company is selling 10,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes.

Required 4

Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $78,000 per month? (Round up your final answer to the nearest unit.)

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

Practical Auditing Techniques For ISO/TS 16949

Authors: Raymond Ness

1st Edition

978-0595273126

More Books

Students also viewed these Accounting questions

Question

x-3+1, x23 Let f(x) = -*+3, * Answered: 1 week ago

Answered: 1 week ago

Question

4. Explain the strengths and weaknesses of each approach.

Answered: 1 week ago

Question

3. Identify the methods used within each of the three approaches.

Answered: 1 week ago