Question

Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it follows:

Number of canoes produced and sold		550		750		900
Total costs
Variable costs	$	112,750	$	153,750	$	184,500
Fixed costs	$	148,500	$	148,500	$	148,500
Total costs	$	261,250	$	302,250	$	333,000
Cost per unit
Variable cost per unit	$	205.00	$	205.00	$	205.00
Fixed cost per unit		270.00		198.00		165.00
Total cost per unit	$	475.00	$	403.00	$	370.00

Required:
Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars. (Do not round intermediate calculations. Round your final answers to nearest whole number.)



If Sandy Bank sells 1,600 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) (Round your answers to the nearest whole number.)



Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $130,000 profit. (Round your answer to the nearest whole number.)

Answer 1

Requirement 1

New break even units	503.00
Break Even sales revenue	251,500.00 or $251,695

Working

A	Sales price per unit	$                   500.00
B	Variable cost per unit	$                   205.00
C=A-B	Contribution margin per unit	$                   295.00
D	Fixed cost	$           148,500.00
E=D/C	New break even units	503.39
F=E x A	Break Even sales revenue	251,694.92

.

Requirement 2

Margin of safety	$                 548,500
Percent of sales	69%

Working

A	Sales price per unit	$                   500.00
B	Variable cost per unit	$                   205.00
C=A-B	Contribution margin per unit	$                   295.00
D	Fixed cost+ desired profit	$           148,500.00
E=D/C	Breakeven units	503
F=E x A	Break Even sales revenue	$           251,500.00
G=1590 x 500	Actual sales	$           800,000.00
	Margin of safety	$                 548,500
	Percent of sales	69%

.

Requirement c

Answer---------944 units

A	Sales price per unit	$                   500.00
B	Variable cost per unit	$                   205.00
C=A-B	Contribution margin per unit	$                   295.00
D	Fixed cost+ desired profit	$           278,500.00
E=D/C	Units to sell to earn $130000 profit	944