Fashion Headwear, Ltd., operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $18 each. All other costs incurred by the company are fixed. Fashion Headwear, Ltd., sells the hats for $30 each.
Required
- If fixed costs total $150,000 per year, what is the breakeven point in units? In sales dollars?
- What is Fashion Headwear”s contribution margin ratio? Its variable cost ratio?
- Assume that Fashion Headwear, Ltd., currently operates at a loss. What actions could managers take to lower the breakeven point and begin earning a profit?