Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors....

4.4 Ratings (662 Votes)


a)	BEP(units) = fixed cost/contribution margin per unit
		50,000/(15-5)
		5000	answer


b)	BEP(units) = (fixed cost + target profit)/contribution margin per unit
			(50000+34000)/10
			8400


c-a)	operating profit
	contribution margin		(9000*10)	90,000
	less : fixed expense			50,000
	operating profit			40,000


c-b)
	selling price per unit			13.5	18
	less variable cost per unit			5	5
	contribution margin per unit			8.5	13
	units sold			9000	9000
	total contribution margin			76500	117000
	less fixed expense			50,000	50,000
	operating profit			26,500	67,000

	decrease in operating profit			13,500
	increase in operating profit				27,000



c-c)
	selling price per unit			15	15
	less variable cost per unit			4.5	6
	contribution margin per unit			10.5	9
	units sold			9000	9000
	total contribution margin			94500	81000
	less fixed expense			50,000	50,000
	operating profit			44,500	31,000

	increase in operating profit			4,500
	Decrease in operating profit				9,000



c-d)
	selling price per unit			15
	less variable cost per unit			6
	contribution margin per unit			9
	units sold			9000
	total contribution margin			81000
	less fixed expense			40,000
	operating profit			41,000

	increase in operating profit			1,000

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