Question

Answer these questions following: 1. When all other variables are held constant and selling price is decreased, the break even point will be a. higher b. lower c. not changed 2. Bridal Shoppe sells wedding dresses. The cost of each dress is comprised of the following: Selling price of $500 and variable (flexible) costs of $200. Total fixed (capacity-related) costs for Bridal Shoppe are $90,000. What is the break even in dresses sold? a 100 b. 200 C. 300 d. 900 3. PNG electric company manufactures a number of electric products. Rechargeable light is one of the PNG's products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. Monthly sales are 8,000 rechargeable lights. If PNG sells 8,000 units what is the profit or loss? a. 200,000 b. 270,000 C. 162,000 d. 400,00 4. PNG electric company manufactures a number of electric products. Rechargeable light is one of the PNG's products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. Monthly sales are 8,000 rechargeable lights. If PNG wants to make a profit of $200,000 per month approximately how many units need to be sold a. 25,000 b. 8,700 C. 15,000 d. 2,500

Answer 1

Answer- 1)- When all the variables are held constant and selling price is decreased, the break even point will be = higher.

2)- The break even in dresses sold =300.

Explanation- Break even point in units = Fixed costs/ Contribution margin per unit

=$90000/($500 per unit-$200 per unit)

= $90000/$300 per unit

= 300 units

3)- If PNG sells 8000 units the profit is =$162000.

Explanation- Profit on 8000 units = Sales-Variable costs-Fixed costs

= ($180 per unit*8000 units) - ($126 per unit*8000 units)-$270000

= $1440000-$1008000-$270000

= $162000

4)- If PNG wants to make a profit of $200000 per months approximately units needs to be sold=8700 units.

Explanation- Units sold to earn desired profit of $200000 = (Fixed costs+ desired profit)/ Contribution margin per unit

=($270000+$200000)/($180 per unit-$126 per unit)

= $470000/$54 per unit

= 8700 units