50 and 4 simultaneously implementing all three of

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Unformatted text preview: .50, and (4) simultaneously implementing all three of these changes. Substituting the appropriate data into Equation 11.3 yields the following results: (1) Operating breakeven point $3,000 $10 $5 (2) Operating breakeven point $2,500 $12.50 $5 TABLE 11.3 600 units 3331⁄3 units Sensitivity of Operating Breakeven Point to Increases in Key Breakeven Variables Increase in variable Effect on operating breakeven point Fixed operating cost (FC) Increase Sale price per unit (P) Decrease Variable operating cost per unit (VC) Increase Note: Decreases in each of the variables shown would have the opposite effect from their effect on operating breakeven point. 426 PART 4 Long-Term Financial Decisions (3) Operating breakeven point $2,500 $10 $7.50 (4) Operating breakeven point $3,000 $12.50 $7.50 1,000 units 600 units Comparing the resulting operating breakeven points to the initial value of 500 units, we can see that the cost increases (actions 1 and 3) raise the breakeven point, whereas the revenue increase (action 2) lowers the breakeven point. The combined effect...
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This document was uploaded on 03/30/2014.

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