Carlyn- Wk 4- Break Even Analysis Assignment

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

This preview shows pages 1–3. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
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?
This is the end of the preview. Sign up to access the rest of the document.

## 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.

### Page1 / 4

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online