Clearwater Hampers is a small British company that sells luxury food and drinks in various combinations in picnic hampers. Food and wine are seen as classic, fail-safe gifts in a market where present-buying is increasingly tricky. Corporate customers, both in the United Kingdom and abroad, are important to the business as well as are a number of department stores. Clearwater has had several orders for more than a quarter of a million dollars and prides itself on how much repeat business it does. The company's leading salesperson, Peter Austin, is placed in charge of an important territory divided on the basis of geography and sales potential. He classifies his customers according to the size of their average orders. The product handled by Austin has an average gross profit percentage of 25%. Austin's annual salary and expenses total $200,000. Austin works 8 hours a day, 5 days a week, and 40 weeks in a year. What is Austin's break-even volume per hour?

Question

Quizplus · Accepted Answer

To find Austin's break-even volume per hour, calculate his total annual cost ($200,000) and divide it by the total number of hours he works in a year (8 hours/day * 5 days/week * 40 weeks/year = 1,600 hours). Then, divide the result by the gross profit percentage (25%) to find the sales volume needed to cover his costs. $200,000 / 1,600 hours = $125/hour. $125 / 0.25 = $500/hour.

Clearwater Hampers Is a Small British Company That Sells Luxury