a) What are total fixed costs?
b) What is the number of break-even units for each product?
c) What level of sales dollars are needed for each product to break even?
d) What is their margin of safety for each product?
e) What is their total revenue and profit?
Total fixed costs for Coats R Us include salaries, advertising, and equipment rental fees. The salaries amount to $90,000, advertising costs $40,000, and equipment rental fees $38,000. Adding these together, the total fixed costs are $168,000.
Total Fixed Costs Calculation
Total fixed costs for Coats R Us amount to $168,000. This includes salaries, advertising, and equipment rental fees totaling $90,000 + $40,000 + $38,000 = $168,000.
Break-Even Units and Sales Dollars
Break-even units represent the number of units that need to be sold to cover all fixed and variable costs. For winter coats, the break-even units are 3,400, with sales dollars needed at $136,000. Windbreakers have 1,333 break-even units with $40,000 in sales dollars needed, while raincoats have 4,750 break-even units with $38,000 required to break even.
Margin of Safety, Revenue, and Profit
Margin of safety is the difference between actual units sold and break-even units. Winter coats have a margin of safety of 21,600 units, windbreakers 18,667 units, and raincoats 250 units. Total revenue is $3,020,000, with a profit of $316,000 if sales meet expectations.