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Trendy Toes produces sport socks. The company has fixed expenses of $75,000 and variable expenses of $0.75 per package. Each package sells for $1.50. The
Trendy Toes produces sport socks. The company has fixed expenses of $75,000 and variable expenses of $0.75 per package. Each package sells for $1.50. The number of packages Trendy Toes needed to sell to earn a $28,000 operating income was 137,334 packages (rounded). If Trendy Toes can decrease its variable costs to $0.55 per package by increasing its fixed costs to $90,000, how many packages will it have to sell to generate $28,000 of operating income? Is this more or less than before? Why? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach Operating income Contribution margin per unit Fixed expenses answer up to the nearest whole unit.) packages to generate $28,000 of operatin Trendy Toes will have to sell Is thi is more or less than before? Why? Trendy Toes would have to The increase in fixed costs target profit volume of sales. Therefore, Trendy Toes will need to sell target profit level packages of socks to earn $28,000 of operating income completely offset by the in variable costs at the prior units in order to achieve its
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