Susan Carrie is planning to sell her special pottery for $25 per unit. She purchases units from a local distributor for $11 each. She can return any unsold units for a full refund. Fixed costs for booth rental, including lighting and security is $8500. Required a) Compute the breakeven point in units sold. b) Suppose the unit purchased is $9 instead of $11, the fixed cost increases by $2000, but the selling price is unchanged. Compute the new breakeven point in units sold. c) Using the above data, explain how cost behaviour affects Patsy Smith’s decision-making?
Susan Carrie is planning to sell her special pottery for $25 per unit. She purchases units from a local distributor for $11 each. She can return any unsold units for a full refund. Fixed costs for booth rental, including lighting and security is $8500. Required a) Compute the breakeven point in units sold. b) Suppose the unit purchased is $9 instead of $11, the fixed cost increases by $2000, but the selling price is unchanged. Compute the new breakeven point in units sold. c) Using the above data, explain how cost behaviour affects Patsy Smith’s decision-making?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 2CE
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Question
Susan Carrie is planning to sell her special pottery for $25 per unit. She purchases units from
a local distributor for $11 each. She can return any unsold units for a full refund. Fixed costs
for booth rental, including lighting and security is $8500.
Required
a) Compute the breakeven point in units sold.
b) Suppose the unit purchased is $9 instead of $11, the fixed cost increases by $2000,
but the selling price is unchanged. Compute the new breakeven point in units sold.
c) Using the above data, explain how cost behaviour affects Patsy Smith’s decision-making?
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