Help Calculating Break-Even-Point in sales!!! Accounting helps, good math-brains help better probably!!!?

Question

Please help to EXPLAIN (not just give answers), how to find each answer to the questions below...THANKS!
This is in accounting class, but I think math might work better
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Al is considering opening a gift shop. He has collected the following information:

Monthly rent: $2,800
Monthly sales salaries: $1,200
In addition to the sales salaries, Al intends to pay a 5% sales commission to his sales staff.
The cost of merchandise sold is expected to be 40% of sales.

1. Determine Al's break-even point (BEP) in monthly sales dollars.
2. Determine the monthly sales dollars required to earn $2000 profit per month.
3. Determine Al's BEP if he reduces rent by $200/month.

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For 4,5, and 6, assume:
*He's reduced his merchadise purchase cost by 10%.
*This will not effect the sale price of her product.
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4. Determine the new Contribution Margin Ratio.
5. What's the new BEP in monthly sales dollars?
6. What's the new sales amount needed for $2,000 profit?

Chuck, you're quite right in your reasoning, but I noticed you miscalculated the total costs as $3000 rather than $4000. Change your figures accordingly, and I'll give you the best answer if no one else completely amazes me with an amazingly enlightening response.

Answer 1

Al gets to keep 55% of his sales value, since 45% is paid out in sales commissions and merchandise cost.

Therefore:

1a) .55x = $3000
1b) x = $5454.54 This is the break even point

2a) .55x = $5000 ($3000 overhead + $2000 profit)
2b) x = $9090.91 This is the $2000 profit point

3a) .55x = $2800
3b) x = $5090.91 This is the BEP if overhead reduced by $200

4) If Al reduces his cost for merchandise by 10%, he will get to keep 65% of his sales (100% - 30% cost - 5% commission). ( I am guessing this is what you mean by Contribution Margin Ratio, but I'm not sure, I am not an accountant). The text is is also a little ambiguous, I am assuming that "reducing his merchandise purchase cost by 10% means that his new cost is 30% instead of 40%. The other way to interpret it is that the 40% cost is reduced by 10%, which would mean the merchandise cost was now 36%. This would mean he would keep 59% of his sales (100% - 36% cost - 5% commission) .

Questions 5 and 6 are calculated the same as #1 and #2, but using the new ratio of 65% (.65) or 59% (.59) instead of the 55% (.55) values.

Hope this helps.

Answer 2

Google SBA, Small Business Administration. Use the link to Score.
There you will find Templates to do this in Excel. The template has Excel Formulas built in.

This is not a 5 min procedure.

Answer 3

The guy above had a little calculation problem

1. .55x=4000 (rent + salaries)

2. .55x=6000

3. .55x=3800