Anita Dawson is doing some financial planning for her small gift store. According to her budget for the upcoming year, Anita is expecting sales of $495,000. She estimates that the cost of goods sold will be $337,000, and other variable expenses will total $42,750. Using the previous year as a guide, Anita anticipates fixed expenses of $78,100.

Anita recalls a meeting she had recently with her accountant, who mentioned that her store already had passed its breakeven point eight and a half months into the year. She was pleased but really didn't know how the accountant had come up with that calculation. Now Anita is considering expanding her store into a vacant building next door to her existing location and taking on three new product lines. The company's cost structure would change, adding another $66,000 to fixed costs and $22,400 to variable expenses. Anita believes the expansion could generate additional sales of $102,000 in the first year.

Calculate Anita's breakeven point without the expansion plans. Draw a break-even chart.

Compute the breakeven point, assuming that Anita decides to expand her business.

Do you recommend that Anita expand her business? Explain.

Answer rating: 100% (QA)

A Calculate Anitas breakeven point without the expansion plans Breakeven point Fixed expenses Sellin... View the full answer