Question

# Bosco Company sells boxes of cookies and has total fixed costs of \$200,000 per month. Variable...

Bosco Company sells boxes of cookies and has total fixed costs of \$200,000 per month. Variable costs are \$8 per box, selling price is \$10. The company desires to make a profit of \$100,000 per month. a. What is number of boxes that most be sold to break even each month? b. What is the contribution margin ratio? c. What is the \$ amount of monthly sales needed in order to make the desired monthly profit

a)

 Break-even point in units = Fixed expenses / Contribution margin per unit Break-even point in units = \$200,000 / (\$10-\$8) Break-even point in units = 100,000 Units

b)

 Contribution margin ratio = Contribution margin / selling price Contribution margin ratio = (\$10-\$8) / \$10 Contribution margin ratio = 20%

c)

 Target sales = (Fixed expenses + target profit) / contribution margin ratio Target sales = (\$200,000+\$100,000) / 20% Target sales = \$1,500,000

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