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Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $172,200 per month.
Problem 1: At present, the company is selling 14,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes.
Problem 2: Refer to the data in Required 1. How many stoves would have to be sold at the new selling price to attain a target profit of $72,000 per month?
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