Question

set up a break-even chat similar to the one in Exhibit 6-12 with proportional scale from zero to $72,000 ( in $12,000 increments) on the vertical axis and from zero to 12,000 units of production (in 2,000- unit increments) on the horizontal axis. Prepare the break-even chart for Morton Company, assuming total fixed costs of $24,000 and unit selling price and unit variable cost fo the company's one product of $8 and $5, respectively. Label the total revenue line and the total cost line. Indicate the break0even point in units and dollars.

Answer 1

Break even point = fixed costs/(unit selling price - unit variable cost)

= 24,000/(8-5)

= 8,000 units

Break even point in $ = 8,000 units * $8 per unit = $64,000

The break-even chart is provided below:

TOTAL KEVENDE 4o'rts o00'ngs coST $34 COST 2 040 4040 OUTtui) PRODVCTION

In the above graph the dotted lines meet at a point that represents the break-even point. We can see that it this point production is 8,000 units (in x axis) and sales is $64,000 (in y axis).