5. Feathered Friends Corporation sells high-quality wooden birdhouse for $20 per unit. Variable…


Question Description:

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Feathered Friends Corporation sells high-quality wooden birdhouse for $20 per unit. Variable expenses are $8 per unit, and fixed expenses associated with the stove total $180,000 per year. Required: (20 points) a. Compute the break-even point in number of units and in total sales dollars. b. Last year, the company sold 18,000 units. The sales manager is proposing a 10% reduction in selling price that he is convinced will result in a 30% increase in sales. Prepare two income statements using the contribution margin format, one under the present operating condition and another under the proposed set up. c. How many units would have to be sold at the proposed 10% reduction in selling price to yield a net operating income of $80,000 for the year?

Answer

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