Question

Khloe’s Boys produces and sells three models of action figures representing the athletes and celebrities Khloe Kardashian has been involved with (let’s assume there are just three). In March 2018, Lamar Odom's sales were $100,000 and its variable expenses were $58,000. French Montana's sales were $150,000 and its variable expenses were $102,000. Tristan Thompson’s sales were $250,000 and its variable expenses were $130,000. The company's fixed expenses were $96,600

a. Determine the overall break-even point for the company in sales dollars. (4 points)

b. Determine the break-even point for each of the Lamar Odom, French Montana, and Tristan Thompson in total sales dollars. Round to the nearest cent. (9 points)

c. Determine the degree of operating leverage for Khloe’s Boys. (3 points)
d. Sales for Tristan Thompson were undoubtedly high in March 2018 because he was Khloe’s current man and they had a child on the way. Unfortunately, the news that Tristan cheated on Khloe broke soon thereafter, and in April 2018, sales of the Tristan Thompson dropped dramatically. The sales of the Lamar Odom and French Montana remained fairly stable. What impact would this have on Khloe’s break even point and net income for the month of April 2018 and why? (3 points)

Answer 1