Reference no: EM132871538
Problem 1 - Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense).
Calculate the number of pairs of shoes Chillmax must sell to earn operating income of $81,900.
Check your answer by preparing a contribution margin income statement based on the number of units calculated.
Problem 2 - Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense).
Calculate the sales revenue that Chillmax must make to earn operating income of $81,900 by using the point in sales equation.
Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.