Problem:

Native American Pottery expects to earn a profit of $95,000 in 20xx. The company manufactures ornamental ceramic tiles. Each lot of 100 blocks requires variable costs of $5.00 for direct materials, $3.50 for direct labor, and $4.50 for overhead. Total variable costs are thus $13 per lot. Fixed costs for 20xx are expected to be $130,000. Each hundred-block lot will sell for $33.

Question 1: Determine how many lots of ceramic tiles the company must sell to earn its targeted profit, and convert this amount to sales dollars.

Question 2: Compute breakeven sales in dollars.

Question 3: Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit. Use the contribution margin as part of your explanation.

Note: Explain all calculation and formulas.