Question

28. The Hartmann luggage company is planning to market a new luggage piece suitable for an  

      airline “carry on”. Based on the information provided below calculate the break-even

      numbers for this product. Show your numerical calculations for your answers. (4 points)                 

       Estimated Sales Revenues $ 6,750,000 (50,000 units @ $135)

       Variable Costs                   $ 4,500,000

       Contribution Margin          $ 2,250,000

       Fixed Costs                        $    600,000

       Operating Profit                 $    400,000

       Break even in unit sales = _______________________ (answer)

       Break even in dollar sales = ______________________ (answer

Answer 1

Variable cost per unit = 4500000 / 50000 = $90 per unit

Break even in unit sales =

=

= 13,333.33 rounded off to 13,334 units

This is the break-even in terms of units sold.

Break even in dollar sales = fixed costs / contribution margin ratio

Where, contribution margin ratio = contribution margin / sales

= 2,250,000 / 6,750,000

= 0.30

Thus, Break even in dollar sales = fixed costs / contribution margin ratio

= 600,000 / 0.30

= $2,000,000

This is the break-even in terms of dollars sales revenue.

answered by: anonymous