80.2K

Verified Solution

Link Copied!

E6-6 Identifying Break-Even Point, Analyzing How Price Changes Affect Profitability; Calculating Margin of Safety, Target Profit [LO 6-1, 6-2, 6-3, 6-4]

Sandy Bank, Inc., makes one model of wooden canoe. And, the information for it follows:

Number of canoes produced and sold		450		650		800
Total costs
Variable costs	$	65,250	$	94,250	$	116,000
Fixed costs	$	280,800	$	280,800	$	280,800
Total costs	$	346,050	$	375,050	$	396,800
Cost per unit
Variable cost per unit	$	145.00	$	145.00	$	145.00
Fixed cost per unit		624.00		432.00		351.00
Total cost per unit	$	769.00	$	577.00	$	496.00
1. Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars. (Do not round intermediate calculations. Round your final answers to nearest whole number.) New Break-Even Units Canoes Break-Even Sales Revenue 2. If Sandy Bank sells 900 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) (Round your answers to the nearest whole number.) Margin of Safety Percentage of Sales % 3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $110,000 profit. (Round your answer to the nearest whole number.) Target Sales Units Canoes

Answer & Explanation Solved by verified expert

See Answer