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Great Legs lotions come in three sizes: 4, 8, and 12 ounces. The following table summarizes the selling prices and variable costs per case of each lotion size.

Per Case 4 oz. 8 oz. 12 oz.
Price $36.00 $66.00 $72.00
Variable cost 13.00 24.50 27.00

Fixed costs are $771,000. Current production and sales are 2,000 cases of 4-oz. bottles; 4,000 cases of 8-oz. bottles; and 1,000 cases of 12-oz. bottles. Great Legs typically sells the three lotion sizes in fixed proportions as represented by the preceding sales amounts.

Required:

a. How many cases of 4-, 8-, and 12-oz. lotion bottles must be produced and sold for Great Legs to break even, assuming that the three sizes are sold in fixed proportions?

b. How many cases of 4-, 8-, and 12-oz. lotion bottles must be produced and sold for Great Legs to reach a target profit of $128,500, again assuming that the three sizes are sold in fixed proportions? Ignore income taxes.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M948387

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