Chapter 5 Exercise Solutions - Chapter 5 Exercise Solutions 5-5 Solution Eaton Tool Company a BE b BE Fixed costs Pr ice Variable cost per unit \$255,000

# Chapter 5 Exercise Solutions - Chapter 5 Exercise Solutions...

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Chapter 5 Exercise Solutions 5-5. Solution: Eaton Tool Company a. Fixed costs BE Price Variable cost per unit \$255,000 \$255,000 8,500 units \$66 \$36 \$30 b. Fixed costs BE Price Variable cost per unit \$200,000 \$200,000 7,407 units \$66 \$39 \$27 The break-even level decreases. c. With less operating leverage and a smaller contribution margin, profitability is likely to be less than it would have been at very high volume levels.
5-11. Solution: Harding Company Q = 10,500, P = \$60, VC = \$25, FC = \$200,000, I = \$62,500 a. ( VC) DOL ( VC) FC 10,500(\$60 \$25) 10,500(\$60 \$25) \$200,000 10,500(\$35) 10,500(\$35) \$200,000 \$367,500 \$367,500 2.19x \$367,500 \$200,000 \$167,500 Q P Q P b. EBIT \$167,500 DFL EBIT \$167,500 \$62,500 \$167,500 1.60x \$105,000 I c. ( VC) DCL ( VC) FC 10,500(\$60 \$25) 10,500(\$60 \$25) \$200,000 \$62,500 \$10,500(\$35) \$367,500 3.50x \$10,500(\$35) \$262,500 \$105,000 Q P Q P I
d. \$200,000 \$200,000 BE 5,714 skates \$60 \$25 \$35 5-13. Solution: United Snack Company a. \$176,250 \$176,250 BE 14,100 bags \$20 (\$.15 50) \$12.50 b. 7,000 bags 20,000 bags Sales @ \$20 per bag \$140,000 \$400,000 Less: Variables costs (\$7.50) (52,500) (150,000) Fixed costs (176,250) (176,250) Profit or loss (EBIT) (\$ 88,750) \$ 73,750
5-13. (Continued) c.

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