ParkerParker sells homemade knit scarves for $ 14$14 each at local craft shows. Her contribution margin ratio is 62.562.5%. Currently, the craft show entrance fees cost AthenaAthena $ 700$700 per year. The craft shows are raising their entrance fees by 2020% next year. How many extra scarves will AthenaAthena have to sell next year just to pay for rising entrance fee costs? Begin by identifying the general formula to compute the breakeven sales in units. ( Fixed expenses + Operating income ) / Contribution margin per unit = Breakeven sales in units Athena will have to sell extra scarves next year just to pay for rising entrance fee costs.

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facundobuzzetti facundobuzzetti · Answer 1 · 2019-10-03T15:58:36+02:00

Answer:

16 more scarves

Explanation:

Giving the following information:

Parker sells homemade knit scarves for $14 each at local craft shows. Her contribution margin ratio is 62.5%.

Contribution margin ratio= (Selling price - unitary variable costs)/ selling price

0.625= (14 - CVu)/14

5.25=CVu

To calculate the extra scarves we need to use the following formula:

break-even point (in units)= fixed costs/contribution margin

break-even point (in units)= (700*0.20)/(14-5.25)= 16 more scarves