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Will E. Coyote owns home-based firm, Coyote Sports, a snowboard manufacturer. Production cost is $500...

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Accounting

Will E. Coyote owns home-based firm, Coyote Sports, a snowboard manufacturer. Production cost is $500 per snowboard and Coyote pays sales associates $300 per snowboard sold. Therefore, variable costs are $800 per snowboard. Each snowboard sells for $2,000, which makes the contribution margin equal to $1,200 ($2,000 ($500 + $300)) per snowboard. Additionally, Coyote Sports incurs fixed costs of $1,200,000.

Breakeven Point (Units) = Fixed Costs / (Selling Price/Unit - Variable Costs/Unit)

a) Using the breakeven formula, determine how many snowboards Coyote needs to sell in order to breakeven. Show your work (1).

b) How much in sales would Coyote need to achieve in order to breakeven? Show your work (1)

c) Suppose that Coyote wants to achieve profits of $4,000,000.

Using a modified version of the breakeven formula, determine how many snowboards Coyote needs to sell in order to achieve pre-tax income of $600,000.

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