How many bookcases must be sold to make an operating profit

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Reference no: EM133434239

Question: Cemalock produces and markets solid oak furniture. Each bookcase requires 20 board feet of oak lumber plus fittings, which cost $50. Oak lumber costs $15 per board foot. Direct labour is paid $25 per hour, and it takes four hours to make each bookcase. The workshop in which the bookcases are made is rented at $2,000 per month. Depreciation of plant and equipment costs $100 per month. Other production and administrative overhead (all of which is fixed cost) is $5,400 per month. Each bookcase is sold for $950. Average monthly sales are 20 bookcases.

Required - SHOW ALL CALCULATIONS:
(a) Calculate the following:
(i) Variable cost per bookcase
(ii) Contribution margin per bookcase
(iii) Total fixed cost per month
(iv) Monthly break-even point in units
(v) Monthly break-even point in sales dollars
(vi) Monthly operating profit
(b) How many bookcases must be sold to make an operating profit of $5,000?
(c) If the company spent an additional $1,000 on advertising, how many additional bookcases would the company need to sell to make it worthwhile?
(d) If the company increased its price from $950 to $1,000 and sales numbers fell from 20 to 18, would this be worthwhile?
(e) If the company decreased its price from $950 to $800 and sales numbers increased from 20 to 25, would this be worthwhile?

Reference no: EM133434239

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