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.
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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
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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
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5-13. (Continued) c.
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