Scott Cole is evaluating a business opportunity to sell grooming kits at dog shows. Scott can buy the grooming kits at a wholesale cost of $29 per set. He plans to sell the grooming kits for $84 per set. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $880 per dog show.
Requirements
1. Determine the number of grooming kits Scott must sell per show to break even.
2. Assume Scott wants to earn a profit of $1,320 per show.
a. Determine the sales volume in units necessary to earn the desired profit.
b. Determine the sales volume in dollars necessary to earn the desired profit.
c. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b.
3. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars, units, and as a percentage.