Happy Ten Produces sports socks. The company have fixed expenditures of $80,000 and variable expenditures of $0.80 per package. Each package sells for $1.60.
1. Evaluate the contribution margin per package and contribution margin ratio.
2. Find out the breakeven point in units and in dollars, by using the contribution margin shortcut approaches.
3. Find out the number of packages Happy Ten requires to sell to earn $22,000 operating income.
4. If Happy Ten can reduce its variable costs to $0.70 per package by raising its fixed costs to $95,000, how many packages will it have to sell to generate $22,000 of operating income? Is it more or less than before? Why?