How many cartons need to be sold annually to break even

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Reference no: EM133348438

Question: Team Spirit prints calendars with college and university names on them. The company has total fixed expenses of $1,035,000 annually plus variable expenses of $3.60 per carton of 12 calendars. Of the variable expenses 70% is cost of goods sold while the remaining 30% relates to variable operating expenses. The fixed manufacturing overhead per unit is $5 carton. All expenses are paid one month after they are incurred. Team Spirit sells each carton of calendars for $10. Current sales level is 165,000 cartons which represent 80% of capacity. YOU MUST SHOW ALL YOUR CALCULATIONS TO EARN MARKS.

1. How many cartons need to be sold annually to break even?

2. Compute the number of cartons that need to be sold annually to earn a profit of $885,000. Is this goal realistic? Give your reason.

3. Compute the annual current margin of safety in units and in percentage.

4. Compute the current annual degree of operating leverage.

5. By what percentage will operating income change if annual sales volume is 15% higher than the current sales volume?

Reference no: EM133348438

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