Question

Jeff Jamail is evaluating a business opportunity to sell cookware at trade shows. Mr. Jamail can buy the cookware at a wholesale cost of $210 per set. He plans to sell the cookware for $350 per set. He estimates fixed costs such as plane fare, booth rental cost, and lodging to be $5,600 per trade show. A Determine the number of cookware sets Mr. Jamail must sell at a trade show to break even (zero profit or loss). Use the following structure to answer this question: a. Determine the amount of the contribution margin per unit. b. Calculate the break-even point in units. c. Calculate the break-even point in sales dollars. B Assume Mr. Jamail desires to earn a profit of $4,900 per show. a. Determine the sales volume in units (sets of cookware) necessary to earn the desired profit. b. Determine the sales volume in dollars necessary to earn the desired profit.

Answer 1

Answer:

Part A:

a. Contribution margin = $140.

b. Break-even point in units = 40 units

c. Break-even point in sales dollars = $14,000

Part B:

a. Sales volume in units = 75 units

b. Sales volume in dollars = $26,250

Explanation:

For Part A

Part a. Determine the amount of the contribution margin per unit.

Contribution margin is the difference of "Sales - Variable cost"

Contribution margin = $350 - $210

Contribution margin = $140.(answer)

Part b. Calculate the break-even point in units.

Breakeven point in units = Fixed cost / Contribution margin per unit

= $5,600 / $140

= 40 units (answer)

Part c. Calculate the break-even point in sales dollars.

Breakeven point in sales dollars = 40 units * $350 = $14,000 (answer)

Part B: Assume Mr. Jamail desires to earn a profit of $4,900 per show

Part a. Determine the sales volume in units (sets of cookware) necessary to earn the desired profit.

Sales volume in units = (Desired profit + Fixed costs) / Contribution margin per unit

= ($4,900 + $5,600) / $140

= 75 units (answer)

Part b. Determine the sales volume in dollars necessary to earn the desired profit.

Sales volume in dollars = 75 units * $350 = $26,250 (answer)