FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Marcus Allen is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Marcus can buy the premium wax at a wholesale cost of $29 per tub. He plans to sell the
premium wax for $84 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $880 per car show.
Requirement 1. Determine the number of tubs Marcus must sell per show to break even.
Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach.
Units sold
Sales in units
Marcus must sell
tubs per show to breakeven.
Requirement 2a. Determine the sales volume in units necessary to earn the desired profit assuming Marcus wants to earn a profit of $1,320 per show.
Marcus must sell
tubs per show to earn a profit of $1,320 per show.
b. Determine the sales volume in dollars necessary to earn the desired profit assuming Marcus wants to earn a profit of 1,320 per show.
Begin by identifying the formula to compute the sales volume in dollars necessary to earn the desired profit.
Target sales in dollars
Marcus must achieve sales of
to earn a profit of $1,320 per show.
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Transcribed Image Text:Marcus Allen is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Marcus can buy the premium wax at a wholesale cost of $29 per tub. He plans to sell the premium wax for $84 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $880 per car show. Requirement 1. Determine the number of tubs Marcus must sell per show to break even. Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. Units sold Sales in units Marcus must sell tubs per show to breakeven. Requirement 2a. Determine the sales volume in units necessary to earn the desired profit assuming Marcus wants to earn a profit of $1,320 per show. Marcus must sell tubs per show to earn a profit of $1,320 per show. b. Determine the sales volume in dollars necessary to earn the desired profit assuming Marcus wants to earn a profit of 1,320 per show. Begin by identifying the formula to compute the sales volume in dollars necessary to earn the desired profit. Target sales in dollars Marcus must achieve sales of to earn a profit of $1,320 per show.
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