Question

Exercise 2-2 (Static) Prepare a Cost-Volume-Profit (CVP) Graph [LO2-2] [The following information applies to the questions displayed below.] Karlik Enterprises distributes a single product whose selling price is $24 per unit and whose variable expense is $18 per unit. The company’s monthly fixed expense is $24,000. Exercise 2-2 (Static) Part 1 Required: 1. Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 units. (Use the line tool to draw three lines (Total Sales Revenue, Fixed Expense, Total Expense). Each line should only contain the two endpoints. For your graph to grade correctly, you must enter the exact coordinates. Once all points have been plotted, click on the line (not individual points) and a tool icon will pop up. You can use this to enter exact co-ordinates for your points as needed. To remove a line from the graph, click on the line and select delete option.) 2. Calculate the company’s break-even point in unit sales.

Answer 1

2 Break-even point = Fixed expenses/Unit contribution margin $24,000/($24 - $18) 4,000 Units 1 Units 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 ($18 x units + $24,000) Sales Revenue Total Expense Fixed Cost $24.000 $42,000 $24,000 $48,000 $60,000 $24,000 $72.000 $78,000 $24,000 $96,000 $96,000 $24,000 $120,000 $114,000 $24,000 $144,000 $132,000 $24,000 $168,000 $150,000 $24,000 $192,000 $168,000 $24,000 $250,000 $200,000 $150,000 -Sales Revenue -Total Expense - Fixed Cost $100,000 $50,000 $0 + 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000