Outback Outfitters sells a small camp stove for $120 per unit. Variable expenses are $84 per...

Transcribed Image Text:

Outback Outfitters sells a small camp stove for $120 per unit. Variable expenses are $84 per unit, and fixed expenses total $144,000 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume the fixed expenses remain unchanged.) 3. At present, the company is selling 15,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% Increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $75,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 At present, the company is selling 15,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. Outback Outfitters Contribution Income Statement Stoves - Present Stoves - Proposed 15,000 Total Sales Variable expenses Per unit $ 120 84 Total Per unit $ 108 84 Contribution margin $ 36 0 $ 24 Fixed expenses 144,000 144,000 Net operating income $ (144,000) $ (144,000) Outback Outfitters sells a small camp stove for $120 per unit. Variable expenses are $84 per unit, and fixed expenses total $144,000 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume the fixed expenses remain unchanged.) 3. At present, the company is selling 15,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% Increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $75,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 At present, the company is selling 15,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. Outback Outfitters Contribution Income Statement Stoves - Present Stoves - Proposed 15,000 Total Sales Variable expenses Per unit $ 120 84 Total Per unit $ 108 84 Contribution margin $ 36 0 $ 24 Fixed expenses 144,000 144,000 Net operating income $ (144,000) $ (144,000)