Question

In: Accounting

How many pairs of stockings must the store sell to break even? What does this represent in total dollar sales?

Teri Hall recently opened Sheer Elegance Inc., a store specializing in fashionable stockings. Hall has just completed a course in managerial accounting, and she believes that she can apply certain aspects of the course to her business. She is particularly interested in adopting the CVP approach to decision making. Thus, she has prepared the following analysis:

Sales price per pair of stockings $10
Variable expense per pair of stockings $4
Contribution margin per pair of stockings $6

Total fixed expense: $240,000

How many pairs of stockings must the store sell to break even? What does this represent in total dollar sales?

Solutions

Expert Solution

Break-even points:

Break even unit sales = Fixed expenses / CM per unit 

Break even unit sales = $240,000 / $6 

Break even unit sales = 40,000 pairs

 

Break even unit sales dollars = Fixed expense / CM ration 

Break even unit sales dollars = $240,000 / .60 

Break even unit sales dollars = $ 400,000

Break even unit sales = 40,000 pairs

Break even unit sales dollars = $ 400,000

Renze Joy Candido answered 2 years ago
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