J & C Stacy Enterprises Is Expecting to Earn a Profit

Essay

J & C Stacy Enterprises is expecting to earn a profit of $180,000 in 20xx. The company manufactures wrought iron lamps. Each lamp requires variable costs of $13 for direct materials, $9 for direct labor, and $12 for overhead. Total variable costs are thus $34 per lamp. Fixed costs for 20xx are expected to be $630,000. Each lamp will sell for $79.
a. Determine how many lamps the company must sell to earn its targeted profit, and convert this amount to sales dollars.
b. Compute breakeven sales in dollars.
c. 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.