Question

The fixed cost at Harley Motors are $7 million annually. The main product has renemies of $8.50 per unit and 84.25 variable cost. Determine the breakeven quantity per year and the animal profitif 200,000 units are sold and if 350,000 units are sold? 1. Have available the Microsoft Excel software program. 2. Construct a table in the Microsoft Excel work sheet as shown below. The instructions are shown in the second table. Fixed costs variable costs Sale price 1000000 4.25 8.5 Breakeven point 2352941 No. of products = Profit * 235295 3.75 3. The construction of the Microsoft Excel sheets and the answered questions has a total grading value of eight (8) points. 4. The deadline for hand in this exercise is indicated at the end of the week of the twelfth module.

Answer 1

Ans:

1)

Option B

False

Explanation

Revenue when 200,000 units are sold = (200,000 * $8.5)

= $1700,000

Cost when 200,000 units are sold = fixed cost + variable cost

= $1000,000 + (200,000 * $4.25)

= $1000,000 + $850,000

= $1850,000

Profit = Revenue - Cost

= $1700,000 - $1850,000

= -$150,000

2)

Option A

True

Explanation

Revenue when 350,000 units are sold = (350,000 * $8.5)

= $2975,000

Cost when 350,000 units are sold = fixed cost + variable cost

= $1000,000 + (350,000 * $4.25)

= $1000,000 + $1487500

= $2,487,500

Profit = Revenue - Cost

= $2,975,000 - $2,487,500

= $4,87,500

3)

Option A

True

Explanation

contribution per unit = sale price - variable cost per unit

= $7.5 - $4.25

= $3.25

Break even point = fixed cost / contribution per unit

= $1000,000 / $3.25

= 307692.3

4)

Option B

False

Explanation

contribution per unit = sale price - variable cost per unit

= $8.5 - $4

= $4.5

Break even point = fixed cost / contribution per unit

= $1000,000 / $4.5

= 222,222.2