57 32 30000 units Break even dollars 57 x 30000 units 1710000 b N 750000 21000

57 32 30000 units break even dollars 57 x 30000 units

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($57 − $32) = 30,000 units Break-even dollars = $57 x 30,000 units = $1,710,000 b. N = ($750,000 + 21,000) ÷ ($57 − $32) = 38,000 units Sales in $ = $57 x 38,000 = $2,166,000 Exercise 3-2B N = Number of units to break-even N = Fixed cost ÷ Contribution margin per unit N = $84,000 ÷ ($78 – $43) N = 2,400 units Break-even in dollars = $78 x 2,400 units = $187,200 Exercise 3-3B Contribution margin/Unit = Sales price – Variable cost/Unit = $60 – $36 = $24 Contribution margin ratio = Contribution margin/Unit ÷ Sales price Contribution margin ratio = $24 ÷ $60 = 40% Sales in dollars = (Fixed cost + Desired profit) ÷ Contribution margin ratio Sales in dollars = ($960,000 + $240,000) ÷ .40 Sales in dollars = $3,000,000 Sales in units = $3,000,000 ÷ $60 = 50,000 units 3-24
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Chapter 03 - Analysis of Cost, Volume, and Pricing to Increase Profitability Exercise 3-4B N = Number of units to break-even Sales Variable cost Fixed cost = Profit (Sales price x N) − (Variable cost per unit x N) = Fixed cost + Profit (Contribution margin per unit x N) = Fixed cost + Profit N = (Fixed cost + Profit) ÷ Contribution margin per unit a. N = ($198,000 + $0) ÷ ($125 − $81) = 4,500 units Sales in dollars = $125 x 4,500 units = $562,500 b. N = ($308,000 + $0) ÷ ($125 − $81) = 7,000 units Sales in dollars = $125 x 7,000 units = $875,000 c. A fixed cost structure increases risk and the number of units required to break-even. Exercise 3-5B a. Price = Target sales price per unit; N = number of units Sales Variable cost Fixed cost = Profit (Price x 5,000) ($4 x 5,000) $35,000 = $40,000 Price x 5,000 = 20,000 + $35,000 + $40,000 Price = (95,000 ÷ 5,000) = $19.00 b. Customers are frequently willing to pay a premium to obtain new and innovative products. Companies can take advantage of this condition by pricing their products using a higher than normal profit margin. Prices can be lowered once competitive forces enter the market. 3-25
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Chapter 03 - Analysis of Cost, Volume, and Pricing to Increase Profitability Exercise 3-6B Sales revenue ($100 x 80,000) $8,000,000 - Gross profit 1,440,000 = Cost of goods sold $6,560,000 ÷ Total units 80,000 = Total product cost per tire 82 - Fixed cost per tire 25 = Variable cost per tire $57 Variable cost = $57 x 80,000 = $4,560,000 Total contribution margin = $8,000,000 - $4,560,000 = $3,440,000 Exercise 3-7B a. Sales price per unit $420 Variable cost per unit (270) Contribution margin per unit $150 b. Break-even in units = Fixed Cost ÷ Contribution margin per unit Break-even in units = $750,000 ÷ $150 Break-even in units = 5,000 c. Required sales in units = (Fixed cost + Profit) ÷ Contribution mar- gin Required sales in units = ($750,000 + $150,000) ÷ $150 Required sales in units = 6,000 3-26
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. . Chapter 03 - Analysis of Cost, Volume, and Pricing to Increase Profitability Exercise 3-8B Required sales = (Fixed cost + Desired profit) ÷ Contribution margin per unit Required sales = ($750,000 + $90,000) ÷ ($50 – $30) Required sales = 42,000 units at old price Required sales = (Fixed cost + Desired profit) ÷ Contribution margin per unit Required sales = ($750,000 + $90,000) ÷ ($46 – $30) Required sales = 52,500 units at new price Additional units required: 52,500 – 42,000 = 10,500 units Exercise 3-9B Required sales = (Fixed cost + Desired profit) ÷ Contribution margin Required sales = ($750,000 + $90,000 + $42,000) ÷ ($46 – $30) Required sales = 55,125 units at new price Exercise 3-10B 3-27  30  60  90  120   Cups of Lemonade Sold   $ 72 36 108 144 a b c d e
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Chapter 03 - Analysis of Cost, Volume, and Pricing to Increase Profitability Exercise 3-11B a. Y = Sales Price Per Telephone Y x Units = Fixed Cost + (Variable Cost Per Unit x Units) +
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