Question
Super Sales Company is the exclusive distributor for a high-quality knapsack. The product sells for $80 per unit and has a CM ratio of 40%.
Super Sales Company is the exclusive distributor for a high-quality knapsack. The product sells for $80 per unit and has a CM ratio of 40%. The companys fixed expenses are $720,000 per year. The company plans to sell 23,000 knapsacks this year.
Required:
1. What are the variable expenses per unit?
2. Use the equation method for the following:
a. What is the break-even point in units and in sales dollars?
b. What sales level in units and in sales dollars is required to earn an annual profit of $80,000?
c. What sales level in units is required to earn an annual after-tax profit of $80,000 if the tax rate is 20%?
d. Assume that through negotiation with the manufacturer, Super Sales Company is able to reduce its variable expenses by $4 per unit. What is the companys new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)
3. Use the formula method for the following:
a. What is the break-even point in units and in sales dollars?
b. What sales level in units and in sales dollars is required to earn an annual profit of $80,000?
c. What sales level in units is required to earn an annual after-tax profit of $80,000 if the tax rate is 20%?
d. Assume that through negotiation with the manufacturer, Super Sales Company is able to reduce its variable expenses by $4 per unit. What is the companys new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)
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