Big Chill, Inc. sells portable dehumidifier units at the current price of $171. Unit variable costs...

Big Chill, Inc. sells portable dehumidifier units at the current price of $171. Unit variable costs are $79. Fixed costs, made up primarily of salaries, rent, insurance and advertising, are $5,490,000. Calculate breakeven sales for Big Chill, Inc. Round your answer to the nearest whole number.

Big Chill, Inc. sells portable dehumidifier units at the current price of $125. Unit variable costs are $83. Fixed costs, made up primarily of salaries, rent, insurance and advertising, are $4,149,000. Management is considering a price decrease of $15. Calculate the increase or decrease in unit sales necessary to breakeven on the price change. Round your answer to the nearest whole number.

Big Chill, Inc. sold 154,795 portable dehumidifier units at $126. Unit variable costs were $71. Fixed costs were $3,280,000. At this price and volume, what was the firm's return on sales? Report your answer as a percentage and round to the nearest whole number.

Big Chill, Inc. sells portable dehumidifier units at $189. Unit variable costs are $114. Fixed costs are $4,175,000. Management has set a profit objective of 16.4% return on sales. Calculate the sales volume in dollars that will provide a 16.4% return on sales. Round your answer to the nearest dollar.

Expert Solution

Answer to Question 1:

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $171 - $79
Contribution Margin per unit = $92

Breakeven Sales = Fixed Costs / Contribution Margin per unit
Breakeven Sales = $5,490,000 / $92
Breakeven Sales = 59,674 units

Answer to Question 2:

Scenario 1:

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $125 - $83
Contribution Margin per unit = $42

Breakeven Sales = Fixed Costs / Contribution Margin per unit
Breakeven Sales = $4,149,000 / $42
Breakeven Sales = 98,786 units

Scenario 2:

New Selling Price per unit = $125 - $15
New Selling Price per unit = $110

New Contribution Margin per unit = New Selling Price per unit - Variable Cost per unit
New Contribution Margin per unit = $110 - $83
New Contribution Margin per unit = $27

New Breakeven Sales = Fixed Costs / New Contribution Margin per unit
New Breakeven Sales = $4,149,000 / $27
New Breakeven Sales = 153,667 units

Change in Breakeven Sales = New Breakeven Sales - Old Breakeven Sales
Change in Breakeven Sales = 153,667 - 98,786
Change in Breakeven Sales = 54,881 units

jeff jeffy answered 2 years ago

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