# Question

Super Sales Company is the exclusive distributor for a high-quality knapsack. 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 knapsacks this year.

Required:

1. What are the variable expenses per unit?

2. Use 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. What sales level in units is required to earn an annual after-tax profit of $90,000 if the tax rate is 25%?

d. Assume that through negotiation with the manufacturer, Super Sales Company is able to reduce its variable expenses by $3 per unit. What is the company’s new breakeven point in units and in sales dollars?

3. Repeat (2) above using the formula method.

Required:

1. What are the variable expenses per unit?

2. Use 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. What sales level in units is required to earn an annual after-tax profit of $90,000 if the tax rate is 25%?

d. Assume that through negotiation with the manufacturer, Super Sales Company is able to reduce its variable expenses by $3 per unit. What is the company’s new breakeven point in units and in sales dollars?

3. Repeat (2) above using the formula method.

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