Sandhill Monograms sells stadium blankets that have been monogrammed with high school and...
Question:
Sandhill Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $50 throughout the country to loyal alumni of over 2,100 schools. Sandhill's variable costs are 41% of sales; fixed costs are $118,000 per month.
Assume that variable costs increase to 47% of the current sales price and fixed costs increase by $10,000 per month. If Sandhill were to raise its sales price by 11% to cover these new costs, what would be the new annual breakeven point in sales dollars?
Breakeven Point:
The breakeven point refers to when sales revenue is equal to the total expenses a company has. A company stops incurring losses at the breakeven point but has not yet recognized a profit on its goods.
Answer and Explanation: 1
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View this answerWe begin by finding the increase in fixed costs:
- $118,000 + $10,000 = $128,000
We then find the contribution margin ratio by subtracting the variable...
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Cost-Volume-Profit Analysis & Income Statements
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Chapter 8 / Lesson 9
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Cost-volume-profit analysis (CVP) seeks to better understand the relationship between costs, revenue, and volume of sales. Explore the components in these analyses, the assumptions they take, and see these through the CVP income statement.
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