Question

Super Sales Company is the exclusive distributor for a high-quality knapsack. The product sells for $100 per unit and has a CM ratio of 30%. The company’s fixed expenses are $429,000 per year. The company plans to sell 16,000 knapsacks this year.

. Use the formula method for the following:

a. What is the break-even point in units and in sales dollars?

b. What sales level in units and in sales dollars is required to earn an annual profit of $117,000?

c. What sales level in units is required to earn an annual after-tax profit of $117,000 if the tax rate is 20%?

d. Assume that through negotiation with the manufacturer, Super Sales Company is able to reduce its variable expenses by $9 per unit. What is the company’s new break-even point in units and in sales dollars? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)

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Question 5 of 5 Total5 of 5

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Answer 1

Part-1 Computaiton of BEP in Unit & Dollar -Super Sales COmpany

Let Unit be Y

Profit= Contribution Margin - Fixed Cost

0=(Y*30)-429000

Y=14300 unit

BEP unit =14300

BEP in $ = 14300*100=$1430000

*CM per Unit =100*0.30=30

Part-2 Computaiton of level required to earn target Profit in Unit & Dollar

Let Unit be Y

Profit= Contribution Margin - Fixed Cost

117000=(Y*30)-429000

Y=18200 unit

Sale Level in unit =18200

Sales Level in $ = 18200*100=$1820000

Part-3 Computaiton of level required to earn target Profit in Unit & Dollar

Let Unit be Y

Profit= Contribution Margin - Fixed Cost

(117000/0.80)=(Y*30)-429000

Y=19175 unit

Sale Level in unit =19175

Sales Level in $ = 19175*100=$1917500

Part-4 Computaiton of BEP in Unit & Dollar -Super Sales COmpany

Let Unit be Y

Profit= Contribution Margin - Fixed Cost

0=(Y*39)-429000

Y=11000 unit

BEP unit =11000

BEP in $ = 11000*100=$1100000

*Revised CM per Unit =Selling Price - Variable Cost

=100-(70-9)=$39 per Unit