Question: E6-6 Identifying Break-Even Point, Analyzing How Price Changes Affect Profitability; Calculating Margin of Safety, Target Profit [LO 6-1, 6-2, 6-3, 6-4] Sandy Bank, Inc., makes
E6-6 Identifying Break-Even Point, Analyzing How Price Changes Affect Profitability; Calculating Margin of Safety, Target Profit [LO 6-1, 6-2, 6-3, 6-4]
Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it follows:
| Number of canoes produced and sold | 450 | 650 | 800 | |||||||||||||||||||||||||||||||||
| Total costs | ||||||||||||||||||||||||||||||||||||
| Variable costs | $ | 65,250 | $ | 94,250 | $ | 116,000 | ||||||||||||||||||||||||||||||
| Fixed costs | $ | 280,800 | $ | 280,800 | $ | 280,800 | ||||||||||||||||||||||||||||||
| Total costs | $ | 346,050 | $ | 375,050 | $ | 396,800 | ||||||||||||||||||||||||||||||
| Cost per unit | ||||||||||||||||||||||||||||||||||||
| Variable cost per unit | $ | 145.00 | $ | 145.00 | $ | 145.00 | ||||||||||||||||||||||||||||||
| Fixed cost per unit | 624.00 | 432.00 | 351.00 | |||||||||||||||||||||||||||||||||
| Total cost per unit | $ | 769.00 | $ | 577.00 | $ | 496.00 | ||||||||||||||||||||||||||||||
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1. Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars. (Do not round intermediate calculations. Round your final answers to nearest whole number.)
2. If Sandy Bank sells 900 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) (Round your answers to the nearest whole number.)
3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $110,000 profit. (Round your answer to the nearest whole number.)
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