Happy Feet buys hiking socks for $6 a pair and sells them for $10. Management budgets monthly fixed… 1 answer below »

Happy Feet buys hiking socks for $6 a pair and sells them for $10. Management budgets monthly fixed costs of $10,000 for sales volumes between 0 and 12,000 pairs.

Requirements

1. Use both the income statement approach and the shortcut contribution margin approach to compute the company’s monthly breakeven sales in units.

2. Use the contribution margin ratio approach to compute the breakeven point in sales dollars.

3. Compute the monthly sales level (in units) required to earn a target operating income of $6,000. Use either the income statement approach or the shortcut contribution margin approach.

4. Prepare a graph of Happy Feet’s CVP relationships, similar to Exhibit 19-5. Draw the sales revenue line, the fixed cost line, and the total cost line. Label the axes, the breakeven point, the operating income area, and the operating loss area.