# MANAGERIAL ACCOUNTING economics homework help

March 19, 2023
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March 19, 2023

Tom Lamb and his long-term personal friend, Kari Legga, have established a  flourishing business selling  lamb products at retail to several thousand customers from nearby Big City, Michigan.  The customers gladly drive the short five miles to the lamb store, because the exquisite taste of the grain-fed lambs, whose fleece at one time was as white as snow, is beyond comparison.  The lamb store, called Legga Lamb to Go sells the product for \$8.00 per pound and purchases them at \$3.00 per pound.  Average weight per order is 5 pounds.  Variable selling costs are 20 per cent of sales per pound and fixed costs are \$180,000 annually.

In the five years that the lamb store has been in existence, their best year ever was selling 100,000 pounds in 2009; the worst year was 2007 when they sold 59,000 pounds.

Required:

a.  Determine the gross profit per pound.  ___________

b.  The break-even sales in dollars are \$ _______________________.  .

c.  Legga Lamp has a target profit of \$122,000.  Therefore, the sales needed to achieve this target profit are \$  _______   or  ________  pounds of product.

d.  Kari and Tom are disagreeing on an important business concept.  She would like to increase target profit to \$150,000 annually.  Tom is reluctant to go along with  this because he does not feel that the break-even point should be moved that far to the right on the volume-cost-profit graph.  Karie snaps back that he is confused  with too much college education and graph analysis.  They look at you, their financial advisor, for the resolution to this issue.  Don’t let them down.