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

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.