This Past Year Castle Rook Industries Sold 2000 Of Its Designer Chrom This past year Castle Rook Industries sold 2,000 of its designer-chrome chess sets. The company reported total sales of $400,000 and variable product costs of $180,000. The company also reported variable selling expenses of $40,000 and fixed expenses of $125,000. Based on this information, several financial metrics and scenarios need to be analyzed to evaluate the company's cost structure, profitability, and break-even points.
Paper For Above instruction Castle Rook Industries' financial data provides insightful information for conducting various cost-volume-profit (CVP) analyses. With total sales revenue of $400,000 from 2,000 units sold, the company’s pricing per unit can be determined, along with its variable expense ratios, contribution margins, and break-even points. Understanding these metrics is crucial for management to make informed decisions regarding pricing strategies, cost control, and sales targets. **1. Variable Expense Ratio** The variable expenses include the cost of goods sold (product costs) and variable selling expenses. The total variable expenses are $180,000 + $40,000 = $220,000. The variable expense ratio is calculated as: Variable Expense Ratio = Total Variable Expenses / Total Sales Revenue = $220,000 / $400,000 = 0.55 or 55% This means that 55% of each dollar in sales goes toward variable costs. **2. Break-even Point in Unit Sales** The contribution margin per unit is essential to determine the break-even point in units. First, the unit sales price is: Sales Price per Unit = Total Sales / Units Sold = $400,000 / 2,000 = $200 The total variable costs per unit are: Variable Cost per Unit = Total Variable Costs / Units Sold = $220,000 / 2,000 = $110 Contribution margin per unit is: Contribution Margin per Unit = Sales Price per Unit - Variable Cost per Unit = $200 - $110 = $90