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Fleet Foot buys hiking socks for $6 per pair and resells them at $10 a pair. Management budgets monthly fixed expenses of $10,000 for any sales volume between 0 and 12,000 pairs.
Problem a) Use the data above to determine the breakeven point in units.
Problem b) Use the contribution margin ratio approach (short-cut) to compute the breakeven point in sales revenue.
Problem c) If Fleet Foot desires a $14,000 operating income, what are the monthly sales in units needed to hit this desired level?
Problem d) Assume Fleet Foot has been selling 8,000 pairs of socks per month. What is the current margin of safety in units? In sales dollars?
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