. (TCO 4) Paschal’s Parasailing Enterprises has estimated that fixed costs per month are $115,600 and variable cost per dollar of sales is $0.38. This means that the contribution margin ratio is 62 percent.


(a) What is the break-even point per month in sales dollars?
(b) What level of sales in dollars is needed for a monthly profit of $67,000?
(c) For the month of August, Paschal’s anticipates sales of $585,000. What is the expected level of profit in dollars?

I am stuck on the letter a.

To calculate the break-even point per month, we need to use the contribution margin ratio. The contribution margin ratio is the percentage of each sales dollar that contributes towards covering fixed costs and generating profit.

Given:
Fixed costs per month = $115,600
Variable cost per dollar of sales = $0.38
Contribution margin ratio = 62% or 0.62

(a) What is the break-even point per month in sales dollars?

To find the break-even point, we need to equate the total contribution margin to the fixed costs.

Let's assume the break-even point in sales dollars is x.

Contribution margin = Sales - Variable costs

0.62*x = x - (0.38*x)

0.62*x = 0.62*x - 0.38*x

0.24*x = $115,600

x = $115,600 / 0.24

x = $482,666.67

Therefore, the break-even point per month in sales dollars is $482,666.67.

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(b) What level of sales in dollars is needed for a monthly profit of $67,000?

To calculate the sales needed for a specific profit level, we need to consider both the fixed costs and the desired profit.

Let's assume the required sales for the desired profit of $67,000 is y.

Contribution margin = Sales - Variable costs

0.62*y = y - (0.38*y)

0.62*y = 0.62*y - 0.38*y + $67,000

0.24*y = $67,000

y = $67,000 / 0.24

y = $279,166.67

Therefore, the level of sales in dollars needed for a monthly profit of $67,000 is $279,166.67.

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(c) For the month of August, Paschal’s anticipates sales of $585,000. What is the expected level of profit in dollars?

To calculate the expected level of profit, we need to subtract total costs from the anticipated sales.

Total costs = Fixed costs + Variable costs

Variable costs = Variable cost per dollar of sales * Sales

Variable costs = $0.38 * $585,000

Variable costs = $222,300

Total costs = $115,600 + $222,300

Total costs = $337,900

Profit = Sales - Total costs

Profit = $585,000 - $337,900

Profit = $247,100

Therefore, the expected level of profit in dollars for the month of August is $247,100.

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I hope this helps! Let me know if you have any further questions.

To calculate the break-even point per month in sales dollars, we need to determine the sales value at which the total revenue equals the total cost, resulting in zero profit or loss. In other words, it is the level of sales at which the company covers all its costs without making a profit or incurring a loss.

Let's calculate the break-even point per month in sales dollars using the given information:

Fixed costs per month = $115,600
Variable cost per dollar of sales = $0.38
Contribution margin ratio = 62% or 0.62

To calculate the break-even point, we can use the following formula:

Break-even point (sales) = Fixed costs / Contribution margin ratio

Plugging in the values, we have:

Break-even point (sales) = $115,600 / 0.62

Calculating this:

Break-even point (sales) = $186,451.61

Therefore, the break-even point per month in sales dollars for Paschal’s Parasailing Enterprises is approximately $186,452.

Now, let's move on to letter b.