1. Cavaliers Inc sell product sells a product for $10 per unit.The fixed cost are $240,000 and the unit variable cost are 60% ofthe selling price. What sales would be necessary in order forcavaliers INC. to realize a profit for 10% of sales.
Show solution.
2. The cheesapeake Bay Company has fixed cost of $400,000 andvariable cost are 75% of the selling price. To realize profits of$100,000 from sales of $500,000 units the selling price per unitmust be ?
Show solution
3. At breakeven point of 200 units variable cost total $400 andfixed cost total $600. The 201 st unit sold will contribute__________ to profits. Show solution
a. $1.00
b. $2.00
c. $3.00
d. $5.00
4. Assume of following cost information for mighty chocolatecompany, Inc.
selling price $120 PER UNIT
Variable Cost $80 per unit
Total fixed cost $80,000
Income tax rate 40%
What minimum volume of sales dollars is required to earn anafter-tax net income of 30,000 show solution
What is the number of units that must be sold to earn an aftertax net income of $42,000
Show solution.
1. Cavaliers Inc sell product sells a product for $10 per unit.The fixed cost are $240,000 and the unit variable cost are 60% ofthe selling price. What sales would be necessary in order forcavaliers INC. to realize a profit for 10% of sales.
Show solution.
2. The cheesapeake Bay Company has fixed cost of $400,000 andvariable cost are 75% of the selling price. To realize profits of$100,000 from sales of $500,000 units the selling price per unitmust be ?
Show solution
3. At breakeven point of 200 units variable cost total $400 andfixed cost total $600. The 201 st unit sold will contribute__________ to profits. Show solution
a. $1.00
b. $2.00
c. $3.00
d. $5.00
4. Assume of following cost information for mighty chocolatecompany, Inc.
selling price $120 PER UNIT
Variable Cost $80 per unit
Total fixed cost $80,000
Income tax rate 40%
What minimum volume of sales dollars is required to earn anafter-tax net income of 30,000 show solution
What is the number of units that must be sold to earn an aftertax net income of $42,000
Show solution.
Related questions
1. Sales Mix and Break-Even Sales
Dragon Sports Inc. manufactures and sells two products, baseballbats and baseball gloves. The fixed costs are $836,000, and thesales mix is 30% bats and 70% gloves. The unit selling price andthe unit variable cost for each product are as follows:
| Products | Unit Selling Price | Unit Variable Cost | ||
| Bats | $70 | $50 | ||
| Gloves | 180 | 110 | ||
a. Compute the break-even sales (units) forboth products combined.
units
b. How many units of each product, baseballbats and baseball gloves, would be sold at break-even point?
| Baseball bats | units |
| Baseball gloves | units |
2.
Break-Even Sales
Currently, the unit selling price of a product is $240, the unitvariable cost is $200, and the total fixed costs are $476,000. Aproposal is being evaluated to increase the unit selling price to$270.
a. Compute the current break-even sales(units).
units
b. Compute the anticipated break-even sales(units), assuming that the unit selling price is increased to theproposed $270, and all costs remain constant.
units
| Basic information | |||
| Exhibit 1 Hallstead Jewelers | |||
| Income Statements for YearsEnded January 31 (thousands of dollars) | |||
| 2003 | 2004 | 2006 | |
| Sales | $9,000,000 | $8,000,000 | $11,000,000 |
| Cost of goods sold | 4,050,000 | 3,600,000 | 4,950,000 |
| Gross margin | $4,950,000 | $4,400,000 | $6,050,000 |
| Expenses | |||
| Selling expense | |||
| Salaries | 2,021,000 | 2,081,000 | 4,085,000 |
| Commissions | 450,000 | 400,000 | 550,000 |
| Advertising | 254,000 | 250,000 | 257,000 |
| Administrative expenses | 418,000 | 425,000 | 535,000 |
| Rent | 420,000 | 420,000 | 840,000 |
| Depreciation | 84,000 | 84,000 | 142,000 |
| Miscellaneous expenses | 53,000 | 93,000 | 122,000 |
| Total expenses | $3,700,000 | $3,753,000 | $6,531,000 |
| Net income | $1,250,000 | $647,000 | $(481,000) |
| Exhibit 2 Hallstead JewelersOperating Statistics | |||
| 2003 | 2004 | 2006 | |
| Sales space (square feet) | 10,000 | 10,000 | 15,000 |
| Sales per square foot | $900 | $800 | $733 |
| Sales tickets | 5,000 | 5,000 | 7,000 |
| Average sales ticket | $1,800 | $1,600 | $1,571 |
Assumptions:
Sales price per ticket = $1,572
Variable cost per unit = $786 (cost of goods sold of $707 +Sales commissions of $79)
Complete the table below:
Alternative #1 | Per unit | Total | Per unit | Total |
# of sales tickets | 7000 | |||
Selling price per ticket | $1,572 | $11,000,000 | ||
Variable cost per ticket | $786 | $5,500,000 | ||
Contribution margin per ticket | $786 | $5,500,000 | ||
Total fixed costs | 5,981,000 | |||
Net income | $(481,000) | |||
Change in net income if accept alternative | ||||
Breakeven point in units | 7,610 | |||
Review of Question #4 requirements. Increase advertisingby $20,000, increase sales revenue (volume) by 2%.
For each question, answer yes or no for each piece ofinformation listed.
Information | For this alternative only, is there a change in this item thataffects calculation of net income? Yes or No | For this alternative only, is there a change in this item thateffects the calculation of the new breakeven point? Yes or No |
Selling price per unit | ||
Variable cost per unit | ||
Total fixed costs | ||
Net income | ||
Sales volume |
Complete the table below:
Alternative #3 | Per unit | Total | Per unit | Total |
# of sales tickets | 7000 | |||
Selling price per ticket | $1,572 | $11,000,000 | ||
Variable cost per ticket | $786 | $5,500,000 | ||
Contribution margin per ticket | $786 | $5,500,000 | ||
Total fixed costs | 5,981,000 | |||
Net income | $(481,000) | |||
Change in net income if accept alternative | ||||
Breakeven point in units | 7,610 | |||
Alternatives | Change in Net Income | New Breakeven point in units | Change in Breakeven point in units |
#1 Decrease SP, Increase sales volume | |||
#2 Eliminate sales commissions | Increases by $550,000 | 6,914 | Decreases by 696 |
#3 increase Fixed costs by $20,000 to get increase of 2% salesrevenue (volume) |
