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
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '06
 wessels
 sales volume, Jeff Jamail, Mr. Jamail

Click to edit the document details