Part B Statistics
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Michael Eerhart Exercise 3-19 1) X = FC / (P-V) X = 300,000 / 15 X = 20,000 Break even point = 20,000 shirts 2) 0 10,000 20,000 30,000 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 Number of Shirts Dollars (000) Break even sales = 20,000 shirts Actual sales = 19,000 shirts Sales short = 1,000 shirts 1000 shirts x $15 CM per shirt = $15,000 lost 4) New variable expenses = $28 and new CM = $12 300,000 = $12 (per shirt) = 25,000 shirts 25,000 shirts x $40 per shirt = $1,000,000 in sales
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Transcript of Part B Statistics
Michael EerhartExercise 3-19
1) X = FC / (P-V)X = 300,000 / 15X = 20,000Break even point = 20,000 shirts
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3) Break even sales = 20,000 shirtsActual sales = 19,000 shirtsSales short = 1,000 shirts1000 shirts x $15 CM per shirt = $15,000 lost4) New variable expenses = $28 and new CM = $12300,000 = $12 (per shirt) = 25,000 shirts 25,000 shirts x $40 per shirt = $1,000,000 in sales5) Actual sales = 23,000 shirtsBreak even sales = 20,000 shirtsExcess shirts = 3,500 shirts x $12 per shirt ($15 - $3) = $42,000 profit6a) FC / (P-V) = $407,000 / ($40 - $18) = 18,500 shirts6b) This change will lower the break-even point from 20,000 shirts down to 18,500 shirts. This is where its important to decide if the possible loss in sales will offset this. The problem with fixed salaries without commission is that there is no incentive to sell more shirts. This could result in a loss of shirts sold, which is not recommended.
