S’No’Kones has the following cost structure.
Selling price per unit.......................................... $1.50
Variable cost per unit.......................................... $0.45
Fixed costs per month........................................ $1,260
Required:
(a) What is the break-even point for S’ No’ Kones?
(b) If the owner wants to earn a monthly pretax profit of $1,200, how many units would need to be sold each month?
(c) The owner wants to earn a pretax profit of $24,360 annually. The snow cone stand is only open five months of the year (May through September) and no fixed costs are incurred when the stand is not open. How many snow cones would need to be sold in total during those five months? If three months of the five generate 75 percent of the company sales, how many snow cones would need to be sold during those three months?
(d) Recalculate your answer to part (c) assuming a tax rate of 20 percent and a desired after-tax profit of $24,360.
(e) S’No’Kones is located in the panhandle of Florida. Discuss circumstances that might cause the BEP and CVP assumptions to be inaccurate.