Question

ProCart manufactures shopping carts which it sells directly to supermarkets at a unit price of $36. Salesmen complain that they are overworked, so management is considering hiring another salesman at a salary of $28,000, with an additional $12,000 budgeted for auto and travel expenses. If the unit variable cost percentage is 40%, how many units will the salesman need to sell before he contributes anything to manufacturing overhead and profit?

Answer 1

salesman sell before contributes anything to manufacturing overhead and profit = 1852 units

Step-by-step explanation:

given data

Sale price = $36

variable cost = 40%

budgeted auto and travel expenses = $12,000

salary = $28,000

to find out

how many units will the salesman sell before contributes anything to manufacturing overhead and profit

solution

we get here makes variable cost that is

makes variable cost = 40% of $36

makes variable cost = $14.40

so contribution margin per unit will be

contribution margin = 36 - 14.4

contribution margin = $ 21.60

and Fixed cost will be as

Fixed cost = salary + budgeted auto and travel expenses

Fixed cost = 28000 + 12000

Fixed cost = $40000

and now salesman sell before contributes anything to manufacturing overhead and profit will be as

salesman sell before contributes anything to manufacturing overhead and profit = Fixed cost ÷ Contribution margin per unit .......................1

salesman sell before contributes anything to manufacturing overhead and profit =
`(40000)/(21.6)`

salesman sell before contributes anything to manufacturing overhead and profit = 1852 units