Carlyn- Wk 4- Break Even Analysis Assignment

Carlyn- Wk 4- Break Even Analysis Assignment - Carlyn J....

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Carlyn J. Medley Assignment Break-Even Analysis The Watson Corporation sells spools of thread to industrial clothing suppliers. They sell 25 pound spools of thread for $150 each. The Watson Corporation’s fixed costs are $200,000 and the variable costs are $2 per pound. a. What is the break-even point in units (spools of thread)? Contribution Margin Price - Variable Cost per Unit P - VC $200,000 = $200,000 = 2000 units $150 - $50 $100 b. Calculate the profit or loss on 1,500 and 3,000 spools of thread. 1,500 spools Revenue = Units * Price per Unit 1,500 * $150 = $225,000 Total Cost = Fixed Costs + Variable Costs $200,000 + (1,500 * $50) = $200,000 + $75,000 = $275,000 Revenue - Total Cost = Profit or Loss 3,000 spools Revenue = Units - Price per Unit 3,000 * $150 = $450,000 BE = Fixed Costs = Fixed Costs = FC $225,000 - $275,000 = ($50,000) Income Loss
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Total Cost = Fixed Costs + Variable Costs $200,000 + (3,000 * $50) = $200,000 + $150,000 = $350,000 Revenue - Total Cost = Profit or Loss c. What is the degree of operating leverage at 2,500 spools?
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This note was uploaded on 04/23/2011 for the course FIN 200 200 taught by Professor Markempasis during the Spring '09 term at University of Phoenix.

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Carlyn- Wk 4- Break Even Analysis Assignment - Carlyn J....

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