Question

Capricio Enterprises distributes a single product whose selling price is $19 and whose variable expense is $15 per unit. The company's fixed expense is $12,000 per month.

1.prepare a profit graph for the company up to a sales level of 4,000 unit

2. estimate the companys break even point in unit sales using your profit graph

Answer 1

Below is the profit graph for capricio Enterprises

Working Note:

- To create the grph, we will have to create a data table first. Contribution Margin for Capricio Enterprises is $4 per unit($19 - $15). It also incurs afixed cost of $12,000 per month. Hence for Individual activity level, the equation would be :

Number of Units * Contribution per unit - Fixed cost= Profit

For Break-even points, we can see, Number of Units and Profit line matches to each other activity level of 3,000. Hence we can state Break-even point is 3000 units since Profit is zero at this activity level.