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EXERCISE 3-17 Break-Even and Target Profit Analysis (L03-4, L03-5, L03-6] Outback Outfitters sells recreational equipment....

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EXERCISE 3-17 Break-Even and Target Profit Analysis (L03-4, L03-5, L03-6] Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated with the stove total $108,000 per month. Required: 1. Compute the break-even point in unit sales and in dollar sales. 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 8.000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 250 increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating con- ditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements 4. Refer to the data in requirement 3 above. How many stoves would have to be sold at the new selling price to yield a minimum net operating income of $35,000 per month

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