Outback Outfitters sells recreational equipment. One of the company$$s products, a small camp stove, sells for $$50$ per unit. Variable expenses are $$32$ per stove, and fixed expenses associated with the stove total $$108,000$ 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 that the fixed expenses remain unchanged.$)$

$3.$ At present, the company is selling $8,000$ stoves per month. The sales manager is convinced that a $10\%$ reduction in the selling price would result in a $25\%$ increase in monthly sales of stoves. 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 $(3)$ above. How many stoves would have to be sold at the new selling price to attain a target profit of $$35,000$ per month?

Answer rating: 100% (QA)

1 To calculate the breakeven point in unit sales and in dollar sales we need to consider the fixed expenses variable expenses per unit and the selling ... View the full answer