Toronto Outdoors is a manufacturer of outdoor items. The company is considering the possibility of offering a new sleeping bag that would sell for $75 each. Cost to manufacture these sleeping bags includes $20 in materials and $17 in direct labor for each sleeping bag. Variable marketing and selling costs would be $8 each. In order to manufacture these sleeping bags, the company would need to incur $60,000 in fixed costs for new equipment.
Required:
a. Compute the break-even point of the sleeping bag in units sold.
b. What would be the total revenue at the break-even point?
c. How many units would Toronto need to sell to earn a profit of $12,000?
d. If fixed costs in fact are $70,500 rather than $60,000, how many units would need to be sold in order to earn $12,000?

Question

Toronto Outdoors is a manufacturer of outdoor items. The company is considering the possibility of offering a new sleeping bag that would sell for $75 each. Cost to manufacture these sleeping bags includes $20 in materials and $17 in direct labor for each sleeping bag. Variable marketing and selling costs would be $8 each. In order to manufacture these sleeping bags, the company would need to incur $60,000 in fixed costs for new equipment. 
Required:
a. Compute the break-even point of the sleeping bag in units sold.
b. What would be the total revenue at the break-even point?
c. How many units would Toronto need to sell to earn a profit of $12,000?
d. If fixed costs in fact are $70,500 rather than $60,000, how many units would need to be sold in order to earn $12,000?

Quizplus · Accepted Answer

The Answer of Toronto Outdoors is a manufacturer of outdoor items. The company is considering the possibility of offering a new sleeping bag that would sell for $75 each. Cost to manufacture these sleeping bags includes $20 in materials and $17 in direct labor for each sleeping bag. Variable marketing and selling costs would be $8 each. In order to manufacture these sleeping bags, the company would need to incur $60,000 in fixed costs for new equipment. 
Required:
a. Compute the break-even point of the sleeping bag in units sold.
b. What would be the total revenue at the break-even point?
c. How many units would Toronto need to sell to earn a profit of $12,000?
d. If fixed costs in fact are $70,500 rather than $60,000, how many units would need to be sold in order to earn $12,000?

Toronto Outdoors Is a Manufacturer of Outdoor Items