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BreakEven Analysis
1.
Engineering estimates indicate the variable cost of manufacturing a new product will be $35 per
unit.
Based on market research, the selling price of the product is to be $120 per unit and variable
selling expense is expected to be $15 per unit.
The fixed costs applicable to the new product are
estimated to be $2800 per period and capacity per period is 100 units.
Assuming that each part is
independent of the one that precedes it, determine
(a)
the income at a volume of 70 units;
(b)
the net income at a volume of 30% of capacity;
(c)
the net income at a sales volume of $10,200;
(d)
the level of operations as a percent of capacity to generate a net income of $2240;
(e)
the number of units that must be sold to make a net income of $1050;
(f)
the sales volume in dollars to suffer a loss of no more that $350;
(g)
the breakeven point in units if fixed costs are increased to $3150;
(h)
the breakeven point as a percent of capacity if fixed costs are reduced by $160 and the
variable cost of manufacturing is increased to $39 per unit;
(i)
the breakeven point in dollars if the selling price is reduced to $100 per unit.
2.
The following data pertains to the operating budget of Matt Manufacturing.
Sales
$720,000
Less: Fixed costs
$220,000
Gross Profit
$500,000
Less: Variable costs
324,000
Net Income
$176,000
Capacity is a sales volume of $800,000 per period.
Determine:
(a)
the net income at 85% capacity;
(b)
the net income at 30% of capacity;
(c)
the level of operations as a percent of capacity to realize a net income of $66,000;
(d)
the level of operations in dollars to sustain a loss of no more than $6600;
(e)
the breakeven point in dollars if fixed costs are increased
by 15%;
(f)
the breakeven point as a percent of capacity if fixed costs are decreased by $18,400 and
variable costs are increased to 52% of sales.
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The lighting division of Universal Electric Company plans to introduce a new streetlight based on
the following accounting information.
Fixed costs per period are $3136; variable cost per unit is $157; selling
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 Fall '05
 TonyCirusolo
 Math

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