Question

mple, the total cost The intercept of the able cost per unit, V. where the TR and TC ple). The Adventures sells 100 trips ll the graph). The slope of TR is the price per un Desert Adventures). The total cost (TC) line shows the total cost for each volume. For example, the to for a volume of 100 trips is $254,400 (= 1100 x $1,200] + $134,400). The intero total cost line is the fixed cost for the period, F, and the slope is the variable cost peri The break-even point is the volume at which TR = TC (that is, where the TR lines intersect). Volumes lower than breakeven result in an operating loss he TR <TC, volumes higher than breakeven result in an operating profit because TR For Desert Adventures, 48 trips is the break-even volume. fit because TR > TC. Self-Study Question The following information for Jennifer's Framing Supply is given for March Compute the following: a Monthly operating profit when sales total $360,000 (as here). b. Break-even number in units. Sales ............ Fixed manufacturing costs .......... Fixed marketing and administrative costs..... Total fixed costs. Total variable costs.......... Unit price Unit variable manufacturing cost..... Unit variable marketing cost................. $360,000 35,000 25,000 60,000 240,000 c. Number of units sold that would produce an operat- ing profit of $120,000. d. Sales dollars required to earn an operating profit of $20,000. e. Number of units sold in March. f Number of units sold that would produce an operat- ing profit of 20 percent of sales dollars. 90 The solution to this question is at the end of the chapter.

Answer 1

Answer with working is given below

$360,000 $220,000 $20,000 a) Monthly operating profit Sales Less: Variable cost manufacturing cost marketing cost Contribution Less: Fixed Cost manufacturing cost marketing cost Operating profit $240,000 $120,000 $35,000 $25,000 $60,000 $60,000 b) Break-even point in units Units Fixed Cost Contribution per unit (Selling price -variable cost) $60,000 $30.00 2,000 c) Units to earn Operating profit - $ 120,000 Units $180,000 Total Target Contribution per unit 6,000 $30.00 Total Target Fixed cost Profit needed Total Target $60,000 $120,000 $180,000 d) Sales dollar needed Sales $ Total Target Contribution margin % $80,000 33.33% $240,000 Total Target Fixed cost Profit needed Total Target $60,000 $20,000 $80,000 Contribution margin % Contribution per unit Selling price per unit $30.00 33.33% $30.00 $90.00 33.33% Units Number of units sold in march Total Sales Selling price per unit $360,000 4,000 f) 5,000 Units should be sold to produce an operating profit of 20% of sales dollars Let Sales bex Sales= Variable cost+Fixed cost + Profit X=0.67X+$60,000 +0.20 X Solving above equation X= $60,000/0.1333 Sales = $450,000 Cross checking Sales Variable cost Contribution Fixed cost Profit Profit as % of Sales $450,000 $300,000 $150,000 $60,000 $90,000 20.00% Units Units to be sold Total Sales Selling price $450,000 $90 5,000