The SkiYA! The company wants to begin selling a new pair of skis, labeled the Downhill Demons, in the upcoming ski season. It wants to know how many skis It will have to sell in order to break even on its investment in materials and equipment. The chief financial officer has provided the following information:

FIXED COSTS

Metal molding machine

$200,000

Milling machine

$150,000

Sander and grinder

$10,000

VARIABLE COSTS (per unit)

Packaging material

Raw material

Shipping

$5.00

$100.00

$20.00

Presses

$25,000

Silkscreen machine

$50.000

The marketing department estimates that it can sell the new skis for $400.00 per unit. Further projections estimate the average of 200 units will be sold per month. The goal is that the skis will break even and start to earn a profit within the first year. Ski-YA!'S target profit level for the end of the first fiscal year is $100,000

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1. Create a break-even analysis where your goal is to determine how many units you must sell to recover your fixed costs.

2. Create a target profit analysis where your goal is to determine how many units you must sell to reach a predefined profit level (when you specify a target profit that is greater than zero, you are setting your goal above the breakeven point).

3. How many months until you break even? How many months until you reach the targeted profit level?

4. If vou increase the price by 10%, how with that affect the length of time in number 3 above?

5. If you decrease the price by 10%, how will that affect the length of time in number 3 above?

6. Try adjusting monthly sales amounts to see how it affects the time to break even or earn a certain profit.

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