Answer:
Instructions are listed below
Explanation:
Giving the following information:
selling price= $140 per unit.
Variable expenses are $98 per stove
Fixed expenses associated with the stove total of $176,400 per month.
1) Break-even point (units)= fixed cost/ contribution margin
Break-even point (units)= 176400/(140-98)= 4200 units
Break-even point (dollars)= fixed costs/ contribution margin rate
Break-even point= 176400/[(140-98)/140]= $588,000
2) Let's assume that the selling and variable costs increase by 10%
Break-even point (units)= 176400/(154- 107.8)= 3818 units
As the denominator increases, fewer units are necessary to cover fixed costs.
3) Normal condition:
Sales= 140*16000= 2,240,000
Variable costs= 98*16000= 1,568,000
Gross income= 672,000
Fixed costs= 176400
Net operating income= 495,600
New condition:
Price= $126; Sales= 20,000 units
Sales=20000*126= 2,520,000
Variable costs= 98*20000= 1,960,000
Gross profit= 560,000
Fixed costs= 176400
Net operating income= 383,600
4) Profit= 80,000
Break-even point (units)= (fixed costs + profit)/contribution margin
Break-even point (units)= (176400 + 80000)/(126 - 98)= 9157 units
