Outback Outfitters sells a small camp stove for $150 per unit. Variable expenses are $105 per unit, and fixed expenses total $184,500 per month. Required: 1. What is 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? (Assume the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $79,000 per month?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Outback Outfitters sells a small camp stove for $150 per unit. Variable expenses are $105 per unit, and fixed expenses total $184,500
per month.
Required:
1. What is 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?
(Assume the fixed expenses remain unchanged.)
3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price
would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating
conditions, and one as operations would appear after the proposed changes.
4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $79,000
per month?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Break-even point in unit sales
Break-even point in dollar sales
Required 4
What is the break-even point in unit sales and in dollar sales?
Stoves
Required 1
Required 2
>
Transcribed Image Text:Outback Outfitters sells a small camp stove for $150 per unit. Variable expenses are $105 per unit, and fixed expenses total $184,500 per month. Required: 1. What is 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? (Assume the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $79,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Break-even point in unit sales Break-even point in dollar sales Required 4 What is the break-even point in unit sales and in dollar sales? Stoves Required 1 Required 2 >
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