A.Mountain Company sells 5 t-shirts for every pair of tennis shoes it sells. T-shirts are priced at $15 and total variable cost read $5/unit. Tennis shoes sell for $50 and cost Hill Company $34 (VC/unit).
A1 What is Hill Company’s breakeven point in units if the company incurs $150,000 in fixed expenses?
A2. If the variable cost per unit increases by 1$ what are foreseen impacts on the breakeven point, contribution margin per unit and mark-up percentage?
A3. What actions should managers of a company take to lower a company’s breakeven point, with regards to sales price per product, fixed and variable expenses?
B.
The Lakeforce Co. had the following monthly income statement. The firm’s contribution margin ratio at its current selling price/unit of $20 is 40%.
· Sales $160,000
· Expenses $180,000
· Operating Income ($ 20,000)
B4. What is the firm’s breakeven point in sales dollars?
B5. What are total expenses if the firm sells 10,000 units?
B6. If the firm wanted to make $ 64,000 EBT (Earnings Before Tax) , what sales volume (# of units) would it have to achieve?
B7. It costs Mayor Manufacturing $15 to produce one can of premium floor paint. If the company uses a 163% mark-up in pricing its products, what is the sales price for a can of paint?
C.Flyer Inc. manufactures Top Pencils which sell for $7.25 each. Flyer Inc expects to sell 82,410 pencils next quarter. At this level of sales, variable expenses will total $184,525 and fixed expenses will total $241,120.
C1. How many pencils will Flyer Inc have to sell next quarter to break even?
C2. If Flyer Inc wants to earn $160,130 in operating profit next quarter, what will sales revenue have to be?
C3. The marketing department forecasts that sales volume will increase by 30% next quarter if Flyer Inc changes the name on the package to Super Pencils. This change will not affect the cost structure for the pencils. What will be the dollar amount change in operating income if Flyer Inc implements the name change?
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