Pete's Pet Products is a sole proprietorship owned by Pete Thompson. The store provides a full-line of pet products, including food, grooming materials, toys, leashes, etc. The company also sells hand-made pet houses, including dog houses, bird cages, and cat castles. Each of the pet houses is being evaluated in terms of cost-volume-profit. See the relevant information below:
Dog House Bird Cage Cat Castle
- Sales Price $140 $95 $160
- Variable Cost $65 $34 $56
- Fixed monthly cost 30% 25% 45%
Sales Commission - 8% of the sales prices
- Sold through distributors - 60%
- Average Fixed costs/month - $32,000
- Calculate the contribution margin for each pet house. Ignore the sales commission for this computation.
- Calculate the monthly break-even units for each pet house. Ignore the sales commission for this computation.