Question

Break-Even Sales and Cost-Volume-Profit Chart For the coming year, Cleves Company anticipates a unit selling price of $142, a unit variable cost of $71, and fixed costs of $418,900. Required: 1. Compute the anticipated break-even sales (units). units 2. Compute the sales (units) required to realize a target profit of $220,100. units 3. Construct a cost-volume-profit chart on paper assuming maximum sales of 11,800 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break even $1,178,600 $1,050,800 $837,800 5624,800 5497.000 4. Determine the probable operating in in the minus sign to indicate a los

Answer 1

1) Annual fixed costs $418,900 Contribution margin per unit $71 Breakeven sales in units 5,900 I Workings: Selling price per unit Less: Variable expense per unit Contribution margin per unit $142 $71 $71 2) + (Annual fixed costs ($418,900 Target profit) $220,100) Contribution margin ratio 0.50 Revenue required $1,278,000 + Workings: $71 Contribution margin per unit Selling price per unit Contribution margin per unit $142 0.50 ($71 / $142]

(5) (U)=(s)/$142 (U)x$71 Sales, $ Sales, units Costs (V) $1,178,600 8,300 $589,300 $1,050,800 7,400 $525,400 $837,800 5,900 $418,900 $624,800 4,400 $312,400 $497,000 3,500 $248,500 Fixed Costs (F) $418,900 $418,900 $418,900 $418,900 $418,900 (S)-(V)-(F) Answer Profit $170,400 Profit $106,500 Profit $0 Breakeven $106,500 Loss $170,400 Loss Cost-Volume-Profit Analysis Chart $200,000 $150,000 $100,000 $50,000 PROFIT EARNED $o $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $0 $50,000 $100,000 -$150,000 $200,000 SALES, DOLLARS

4) Number units sold Unit contribution margin Contribution margin Less: Fixed costs Probable op. income 9,400 $71 [As calculated in Part-1] $667,400 [9400 units x $71] $418,900 $248,500