Question

Question:

Peter is the sole owner of a T-Shirt Shop.  He has provided you with the following information in relation to the 2018 budget:-

Estimated sales units for the year                                                                         40,000

Selling price per unit                                                                                                   $30

Estimated total sales                                                                                      $1,200,000

Based on the above sales units and dollars, the following expenses are expected to be incurred annually:-

Cost of Goods Sold (@ $12 per unit)                                                                 $480,000

Rent of Premises (75% Shop, 25% Office)                                                           $44,040

Salaries – Sales Staff                                                                                          $168,000

Salaries – Office Staff                                                                                           $80,400

Delivery Expenses (@$1.25 per unit)                                                                  $50,000

Advertising                                                                                                           $24,600

Interest on Loan (Loan $30,000 @ 8% per annum)                                              $2,400

Office Supplies                                                                                                       $2,760

Sales Commission Expense (@2.5% of sales)                                                      $30,000

Depreciation – Shop Fittings                                                                                 $6,480

Depreciation – Computer Equipment                                                                   $4,200

Depreciation – Delivery Van                                                                                  $7,200

Note: All costs are considered to be fixed unless otherwise stated.

         

REQUIRED:

         

1. Calculate the variable cost per unit

2. Calculate the annual fixed costs

3. Calculate the contribution margin per unit.

Question Cont.:

4. Calculate the breakeven point in units.

5. Calculate the profit from the estimated level of sales.

6. Calculate the expected sales dollars needed to make a profit of $280,000.

How many units must be sold to achieve the same profit of $280,000?

Answer 1