Reference no: EM132780384

Question - Krait Products sells camping equipment. One of the company's products, a camp lantern, sells for $100 per unit. Variable expenses are $70 per lantern, and fixed expenses associated with the lantern total $141,600 per month.

Required -

1. Compute the company's break-even point in number of lanterns and in total sales dollars.

2. If the variable expenses per lantern increase as a percentage of the selling price, will it result in a higher or a lower break-even point?

Higher

Lower

3. At present, the company is selling 8,850 lanterns per month. The sales manager is convinced that a 5% reduction in the selling price will result in a 20% increase in the number of lanterns sold each month. Prepare two contribution format income statements: one under present operating conditions, and one as operations would appear after the proposed changes. Show both total and per-unit data on your statements.

4. At present, the company is selling 8,850 lanterns per month. The sales manager is convinced that a 5% reduction in the selling price will result in a 20% increase in the number of lanterns sold each month. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income of $72,300 per month?