Question:
Dickens Co. sells three styles of Christmas trees - past, present and future. Fixed costs total 3,900 per year. The following information is available:
Selling Price per tree: 11 (Past), 15 (Present), 17 (Future)
Number of trees sold: 1000 (past), 2000 (present), 2000 (Future)
variable cost per tree: 6 (past), 12 (present), 16 (future)
How many trees (in total and of each style) must be sold annually to break even?
The following amounts have been budgeted for Hemingway's 2005-2006 fiscal year.
total fixed expenses: 832500
sales price per unit: 40
variable costs per unit: 25
a. What is Hemingway's budgeted breakeven sales level in units?
are to be considered separately, i.e. each is independent of the other two)
b.If Hemingway can reduce fixed expenses by 22500, will breakeven sales in units be higher or lower and by how many units?
c. If Hemingway spends an additional 30000 on advertising, sales volume should increase by 2500 units. what effect would this have on operating income?
d. if Hemingway can reduce fixed expenses by 41625, by how much can variable expenses per unit increase and still allow the company to maintain the breakeven sales level from part a?