Jake Spahr is evaluating a business opportunity to sell premium car wax at vintage car shows. The

Question:

Jake Spahr is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Jake can buy the premium wax at a wholesale cost of $32 per tub. He plans to sell the premium wax for $62 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $600 per car show.
Requirements
1. Determine the number of tubs Jake must sell per show to break even.
2. Assume Jake wants to earn a profit of $900 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 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.
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...