As an accountant for E-Optical you are given the following information. Over a span of one...
As an accountant for E-Optical you are given the following information. Over a span of one year you are asked to do Break-Even Analysis. Based on a one-year timeframe you find out that the company has accumulated $1.2M in fixed costs. Additional fixed costs have been accumulating on a monthly basis at a rate of $20 000 per month on top of the already $1.2M. The variable cost team has informed you that the manufacturing per unit costs are currently at $125. The administrative costs per unit are set at $30. The CEO of the company has decided to sell the unit at $220. Base on a one-year timeframe and a capacity of 25 000 units annually:
a. (3 marks) Find the formula for the total revenue and total cost
b. (1 mark) Find the contribution margin
c. (4 marks) Compute the break-even point in units
d. (2 mark) Compute the break-even point in dollars
e. (5 marks) Draw the break-even chart for this example. Label: break-even point, fixed cost, capacity, and the axis.
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