In-Class Demo3

# In-Class Demo3 - Demo Chapter 3 Jeff Jamail is evaluating a...

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Demo Chapter 3

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Jeff Jamail is evaluating a business opportunity to sell cookware at trade shows. Mr. Jamail can buy the cookware at a wholesale cost of \$210 per set. He plans to sell the cookware for \$350 per set. He estimates fixed costs such as plane fare, booth rental cost, and lodging to be \$5,600 per trade show. a. Determine the number of cookware sets Mr. Jamail must sell at a trade show to break even (zero profit or loss). Formula for Computation of Break-Even Point in Units Fixed Cost \$5,600  =  = 40 sets Contribution Margin Per Unit \$140 Break-Even Point in Sales Dollars Sales Price Per Unit \$ 350 X Number of Units 40 Sales Volume in Dollars \$14,000 Income Statement Sales (40 x \$350) \$14,000 - Variable Cost (40 x \$210) (8,400) Contribution Margin 5,600 - Fixed Cost (5,600) Net Income \$ 0 (1) Determine the contribution margin per unit: (4) Confirm the results by preparing an income statement. 3)The break-even point in number of dollars can be computed as follows: (2) When the total contribution margin is sufficient to pay for the fixed costs, Mr. Jamail will break even. The number of units required to break even can be computed as follows: Per Unit Contribution Margin Sales Price \$350 - Variable Cost 210 Contribution Margin \$140 Contribution Margin Per Unit Approach
Jeff Jamail is evaluating a business opportunity to sell cookware at trade shows. Mr. Jamail can buy the cookware at a wholesale cost of \$210 per set. He plans to sell the cookware for \$350 per set. He estimates fixed costs such as plane fare, booth rental cost, and lodging to be \$5,600 per trade show. a. Determine the number of cookware sets Mr. Jamail must sell at a trade show to break even (zero profit or loss). Contribution Margin Ratio

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## This note was uploaded on 02/22/2012 for the course BUAD 2050 taught by Professor Nicholasw.schroeder during the Spring '09 term at Toledo.

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In-Class Demo3 - Demo Chapter 3 Jeff Jamail is evaluating a...

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