Question

P7-64A (similar to) Question Help Planning Partners Investors is opening an office in Newark, New Jersey. Fixed monthly expenses are office rent ($2,000), depreciation on office furniture ($270), utilities ($280), special telephone lines ($610), a subscription to an online brokerage service ($650), and the salary of a financial planner ($5,190). Variable expenses include payments to the financial planner (14% of revenue), advertising (7% of revenue), supplies and postage (3% of revenue), and usage fees for the telephone lines and computerized brokerage service (1% of revenue). Read the requirements. Requirement 1. Compute the investment firm's breakeven revenue in dollars. If the average trade leads to $500 in revenue for Planning Partners, how many trades must it make to breakeven? First identify the formula to calculate the breakeven point in dollars. D - Breakeven sales Breakeven sales

Answer 1

1. break even sales [ in Rs.]= fixed cost/ profit volume ratio

fixed cost as follow:

office rent	$2000
depreciation on office furniture	$270
utilities	$280
special telephone line	$610
a subscription of online brokerage service	$650
salary of financial planner	$5190

total fixed cost=$9000
profit volume ratio=contribution/sales*100
contribution= sales-variable cost
sales=500
variable cost:

payments of financial planner [14%]	$70
advertising[7%]	$35
supplies and packages [3%]	$15
brokerage services[1%]	$5

total is =$ 125
contribution= $500-$125=$375
profit volume ratio=375/500*100=75%
break even sales=fixed cost/ profit volume ratio= 9000/75%=12,000$
2. required sales revenue = earning+ fixed cost/ profit volume ratio =&5250+&9000/75%=$19000
3.suppose sales revenue $300 ,
variable cost=300*25%=$75
contribution=300-75=$225
profit volume ratio= 225/300*100=75%
break even sales =fixed cost/profit volume ratio= 9000/75%=12000