Compute the Break-Even Point

QUESTION 1
Compute the Break-Even Point

Mackson Products distributes a single product, a woven basket; its selling price is $8 and its variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.

Don't use plagiarized sources. Get Your Custom Essay on
Compute the Break-Even Point
Just from $13/Page
Order Essay

Required:

1. Solve for the company’s break-even point in unit sales using the equation method.

2. Solve for the company’s break-even point in sales dollars using the equation method and CM ratio.

3. Solve for the company’s break-even point in unit sales using the contribution margin method.

4. Solve for the company’s break-even point in sales dollars using the contribution margin met and the CM ratio.

QUESTION 2
Break-Even Analysis and CVP Graphing

Horace Society is planning its annual Western Fair Raceway Gala. The Gala committee has assembled the following expected costs for the event:

Dinner (per person) $10
Gaming tokens and program (per person) $2
Prize payouts $4,300
Tickets and advertising $800
Private box suite rental $1,700
Lottery licences $200

The committee members would like to charge $40 per person for the evening’s activities.

Required:

1. Compute the break-even point for the Gala (in terms of the number of persons that must attend.)
2. Assume only 200 persons attended the Gala last year. If the same number attend this year, what price per ticket must be charged to break even?
3. Using the $40 ticket price per person amount, prepare a CVP graph for the Gala from zero tickets up to 600 tickets sold.

QUESTION 3
Basic CVP Analysis

Klein Company distributes a high-quality bird feeder that sells for $30 per unit. Variable costs are $12 per unit, and fixed costs total $270,000 annually.

Required:

Answer the following independent questions:

1. What is the product’s CM ratio?
2. Use the CM ratio to determine the break-even point in sales dollars.
3. The company estimates that sales will increase by $60,000 during the coming year due to increased demand. By how much should operating income increase?
4. Assume that the operating results for last year were as follows:
Sales $600,000
Variable expenses 240,000
Contribution margin 360,000
Fixed expenses 270,000
Operating income $90,000
a. Compute the degree of operating leverage at the current level of sales.
b. The president expects sales to increase by 16% next year. By how much should operating income increase?
5. Refer to the original data. Assume that the company sold 23,000 units last year. The sales manager is convinced that a 12% reduction in the selling price, combined with a $40,000 increase in advertising expenditures, would cause annual sales in units to increase 30%. Prepare two contribution-format income statements, one showing the results of last year’s operations and one showing what the results of operations would be if these changes were made. Would you recommend that the company do as the sales manager suggests?
6. Refer to the original data. Assume again that the company sold 23,000 units last year. The president feels that it would be unwise to change the selling price. Instead, he wants to increase the sales commission by $4 per unit. He thinks that this move, combined with some increase in advertising, would increase annual unit sales by 50%. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.

201906280406221_acc_2354_hand_in_assignment_4_2019_scoring_rubric

Chegg Answers
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with CheggAnswers

Quality Essays

At CheggAnswers.com, we boast of our quick turnaround that is facilitated by our experienced team of writers. We can handle both short and long deadlines, as per our clients’ requests. Quality work is the cornerstone of our service.

Top Writers

Our writers are qualified professionals who are well-versed with more than 80 subjects. We have achieved this milestone overtime because of our rigorous hiring process that filters professionals from average writers. We believe that exposing our customers to qualified writers is the starting point of delivering quality work.

Plagiarism-Free Papers

Our writers submit papers that are written from scratch to uphold the much-needed originality when submitting your papers. Our references are mainly sourced from reputable databases such as Emerald Insight, Ebsco, and ProQuest. All papers follow the conventional styles of referencing that include APA, MLA, Chicago, Harvard, and Vancouver.

24/7 Customer Support

The customer is king and as such, CheggAnswers.com has a committed support department that handles all concerns and clarifications from our clients. We encourage customers to contact us at any given time through our listed telephone, email, and text platforms.

Prompt Delivery & 100% Money Back Guarantee

Your work starts immediately after placing an order. Our writers are aware of our company policy that guarantees quality work to all our customers. For this reason, CheggAnswers strives to deliver assignments on time to avoid any delays that might compromise our relationship with clients.

Free Revisions

Although we are confident in our writers, you are entitled to free revisions whenever need arises. However, we highly disregard customers who misuse this privilege.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

We offer a wide range of services that are aligned with the customers’ needs and expectations. We have positioned ourselves strategically to become a one-stop-shop where customers can access all academic services under one roof.

Essays

Academic Writing

Our main service is academic paper writing, which is handled by a pool of experienced writers who uphold the expected standards of writing. Over the years, we have delivered quality work to our clients because of our commitment to promote quality over quantity.

Admissions

Admission Essays

Whether you are about to Join College or you are a continuing student, CheggAnswers is there to help. Our competent professionals will solve all your writing problems. Personalization is key to scoring highly and satisfying the admission board’s expectations. We will help you achieve your academic goals.

Reviews

Editing & Proofreading

Some of our clients prefer to write their essays and have a third-party like CheggAnswers proofread their work. We have a skilled team of editors who comb through your paper and make any amends to increase its overall appeal. For all your editing and proofreading needs, CheggAnswers is there to help.

Reviews

Revision Support

At CheggAnswers, we offer an extensive revision support that works tirelessly to ensure that customer needs and expectations are met. We work closely with writers upon a customer’s revision request to ensure that we keep our promise of delivering quality work to all our clients.