High-Low Cost Estimation and Profit Planning Comparative 2017 and 2018 income statements for Bismark Products Inc....
High-Low Cost
Estimation and Profit Planning
Comparative 2017 and 2018 income statements for Bismark Products
Inc. follow:
| BISMARK
PRODUCTS INC. Comparative Income Statements For Years Ending December 31, 2017 and 2018 |
||
|---|---|---|
| 2017 | 2018 | |
| Unit sales | 6,000 | 11,000 |
| Sales revenue | $ 78,000 | $ 143,000 |
| Expenses | (70,000) | (85,000) |
| Profit (loss) | $ 8,000 | $ 58,000 |
(a) Determine the break-even point in units.
Answer
Incorrect
Mark 0.00 out of 1.00
units
(b) Determine the unit sales volume required to earn a profit of
$12,000.
Answer
Incorrect
Mark 0.00 out of 1.00
units
Homework Answers
| Variable cost per unit = ($85,000 - $70,000) / (11,000 - 6,000) |
| Variable cost per unit = $3 |
| Fixed cost = $70,000 - (6,000*$3) |
| Fixed cost = $52,000 |
| Unit selling price = $78,000 / 6,000 |
| Unit selling price = $13 |
a)
| Break-even point in units = Fixed cost / Contribution margin per unit |
| Break-even point in units = $52,000 / ($13 - $3) |
| Break-even point in units = 5,200 units |
b) Net profit = Sales - Variable cost - Fixed cost
Assume number of units are 'y', than
$12,000 = $13y - $3y - $52,000
$12,000+$52,000 = $10y
$64,000 = $10y
y = $64,000 / $10
y = 6,400 units sales to be sold
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High-Low Cost
Estimation and Profit Planning
Comparative 2017 and 2018 income statements for Bismark Products
Inc....
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