Outback Outfitters sells recreational equipment. One of thecompany’s products, a small camp stove, sells...

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Accounting

Outback Outfitters sells recreational equipment. One of thecompany’s products, a small camp stove, sells for $140 per unit.Variable expenses are $98 per stove, and fixed expenses associatedwith the stove total $168,000 per month.
Required:
1. What is the break-even point in unit sales and in dollarsales?
2. If the variable expenses per stove increase as a percentage ofthe selling price, will it result in a higher or a lower break-evenpoint? (Assume that the fixed expenses remain unchanged.)
3. At present, the company is selling 13,000 stoves per month. Thesales manager is convinced that a 10% reduction in the sellingprice would result in a 25% increase in monthly sales of stoves.Prepare two contribution format income statements, one underpresent operating conditions, and one as operations would appearafter the proposed changes.
4. Refer to the data in Required 3. How many stoves would have tobe sold at the new selling price to attain a target profit of$70,000 per month?

Answer & Explanation Solved by verified expert

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Answer1Selling Price 140 per unitVariable Expenses 98 per unitContribution Margin per unit Selling price per unit Variableexpenses per unit 140 98 42 per unitContribution Margin ratio Contribution Margin per unit Selling price per unit 42 140 30Fixed cost 168000Breakeven Units Total Fixed cost Contribution Margin perunit 168000 42 4000 stovesBreakeven See Answer

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In: AccountingOutback Outfitters sells recreational equipment. One of thecompany’s products, a small camp stove, sells for...Outback Outfitters sells recreational equipment. One of thecompany’s products, a small camp stove, sells for $140 per unit.Variable expenses are $98 per stove, and fixed expenses associatedwith the stove total $168,000 per month.Required:1. What is the break-even point in unit sales and in dollarsales?2. If the variable expenses per stove increase as a percentage ofthe selling price, will it result in a higher or a lower break-evenpoint? (Assume that the fixed expenses remain unchanged.)3. At present, the company is selling 13,000 stoves per month. Thesales manager is convinced that a 10% reduction in the sellingprice would result in a 25% increase in monthly sales of stoves.Prepare two contribution format income statements, one underpresent operating conditions, and one as operations would appearafter the proposed changes.4. Refer to the data in Required 3. How many stoves would have tobe sold at the new selling price to attain a target profit of$70,000 per month?