Reveen Products sells camping equipment. One of the company's products, a camp lantern, sells for $140 per unit. Variable expenses are $98 per lantern, and fixed expenses associated with the lantern total $201,600 per month.
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| 1. |
Compute the company's break-even point in number of lanterns and in total sales dollars.
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| Number of lanterns |
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| Total sales dollars |
$ |
| 2. |
If the variable expenses per lantern increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.)
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Higher break-even point |
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Lower break-even point |
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| 3. |
At present, the company is selling 14,000 lanterns per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. (Input all amounts as positive values except losses which should be indicated by a minus sign.)
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Present
14,000 lanterns
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Proposed
lanterns
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Total |
Per Unit |
Total |
Per Unit |
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$ |
$ |
$ |
$ |
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$ |
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$ |
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$ |
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$ |
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| 4. |
Refer to the data in (3) above. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income of $77,000 per month? (Round your answer to the nearest whole number.)
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| Number of lanterns to be sold |
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