1.A store has fixed costs of 80,000 and an avarage gross margin of 26%. Variable expenses are estimated to be 6% of sales.
a.calculate the break-even sales volume.
b.calculate the profit/losses for sales of 300,000
I got the formulas:
unit contribution= price - variable costs
break even point= fixed costs/ unit contribution
profit/loss= sales revenue -varible cost- fixed costs
I don't know how to plug the numbers in..?
To calculate the break-even sales volume, you need to use the formula:
Break-even point = Fixed costs / Unit contribution
Here, the fixed costs are given as $80,000.
The unit contribution can be calculated as follows:
Unit contribution = Price - Variable costs
The average gross margin is given as 26%, which means the price is 100% + 26% = 126% of the variable costs.
So, the unit contribution is 126% - 6% = 120% of the variable costs.
Now, to find the variable costs, you can calculate 6% of the estimated sales volume.
For example, if the estimated sales volume is "x," then the variable costs would be 6% of "x," which is 0.06x.
Now, you have all the necessary values to calculate the break-even point.
Break-even point = $80,000 / (1.2 * 0.06x)
To calculate the profit/loss for sales of $300,000, you can use the formula:
Profit/loss = Sales revenue - Variable costs - Fixed costs
Here, the sales revenue is given as $300,000.
The variable costs can be calculated as 6% of $300,000, which is 0.06 * $300,000 = $18,000.
Plug in these values into the profit/loss formula:
Profit/loss = $300,000 - $18,000 - $80,000
This will give you the profit/loss amount for sales of $300,000.