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Demonstration Problem for Chapter 3
Demonstration Problem 31
CostVolumeProfit Analysis
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.
Required
a.
Determine the number of cookware sets Mr. Jamail must sell at a trade show to
break even (zero profit or loss).
BE(units)
=
FC
=
$5600
=
40 units
CM/unit
$140/unit
b.
Assume Mr. Jamail desires to earn a profit of $4,900 per show.
(1) Determine the sales volume in units necessary to earn the desired profit.
Sales volume
=
FC + DP
=
$5600 + $4900
=
75 units
CM/unit
$140/unit
(2) Determine the sales volume in dollars necessary to earn the desired profit.
Sales volume
=
FC + DP
=
$5600 + $4900
=
$26250
CM Ratio
140/350
.4
(3) Using the contribution margin format, prepare an income statement to confirm
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 Spring '06
 wessels

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