Breckenridge Manufacturing produces a snowboard.

Prices and costs are as follows: Snowboard [Selling price: $500] [Variable costs: $300]

Breckenridge incurs $12,500 in monthly fixed costs related to its ski operations. Breckenridge is currently earning $20,000 per year in operating income.

Question #1: Compute the breakeven point in terms of number snowboards that must be sold per year.

Question #2: Breckenridge’s management requires operating income of $30,000 per year. How many snowboards must Breckenridge sell per year to achieve this goal? How many additional snowboards is this compared to what Breckenridge is currently selling?

Question #3: If Breckenridge can reduce its fixed costs to $10,000 per month, what total sales dollars are needed to achieve the target operating income?

Question #4: Breckenridge wants to run an advertising campaign costing $10,000 related to the sale of the snowboard. What quantity of sales are needed to pay for the advertising campaign and to achieve the $30,000 in target income required by management? If Breckenridge can increase sales 15% due to the advertising campaign, should it run it?

Question #5: Based on your work above, write a paragraph explaining

A. Breckenridge’s current situation;

B. What you think Breckenridge should do to increase its operating income (compare 3 and 4). Explain why you chose your strategy.

Prepare Worksheet 

Set up your Excel workbook with 4 worksheets

Input / Conclusion (requirement 5)

Breakeven analysis (requirement 1 above)

Operating income (requirements 2, 3 above)

Advertising campaign (requirement 4 above)