Question

Using the following information, estimate Rogue Outdoors annual or monthly market demand for adult hiking shoes: Number of 18-65 year old adults in market: 53,600 Total percentage of adults who buy hiking shoes each year 10% Rogue Outdoor share of total hiker market 25% Calculate Rogue Outdoor’s break-even point in units and dollars for selling hiking shoes if: Average per unit variable cost (Wholesale price Rogue pays for hiking shoes): $50 Total fixed costs assigned to hiking shoes: $36,000 Average per unit revenue (price) of hiking shoes: $100

Answer 1

Answer:

Rogue Outdoor’s break-even point in units and dollars is 720 units and $72,000 respectively.

Explanation:

In this question we use the formula of break-even point in the unit which is shown below:

= (Fixed expenses) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $100 - $50

= $50

Now put these values to the above formula  

So, the value would equal to

= $36,000 ÷ 50 per units

= 720 units

And, the formula of break-even point in dollars which is shown below:

= (Fixed expenses) ÷ (Contribution margin ratio)

where,  

Contribution margin ratio = (Contribution margin ÷ selling price per unit) × 100

where, Contribution margin =  Selling price per unit - Variable expense per unit )

= $100 - $50

= $50

So, the contribution margin ratio = 50%

Now put these values to the above formula  

So, the value would equal to

= $36,000 ÷ 50%

= $72,000