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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
EXERCISE 5–16 Break-Even and Target Profit Analysis [LO3, LO4, LO5, LO6]
Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $60 per unit and has a CM ratio of 40%. The company’s fixed expenses are $360,000 per year. The company plans to sell 17,000 bookbags this year.
Required:
1.      What are the variable expenses per unit?
2.      Using the equation method:
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
$90,000?
c.       Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses by $3 per unit. What is the company’s new break-even point in units and in sales dollars?
3.      Repeat (2) above using the formula method.
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