# Break-Even Analysis

(See attached file for full problem description)

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The Hartnett Corporation manufactures baseball bats with Sammy Sosa's autograph stamped on them. Each bat sells for $13 and has a variable cost of $8. There is $20,000 in fixed costs involved in the production process.

a. Compute the break-even point in units.

Selling price per item= $ 13

Variable cost per bat= $ 8

Contribution margin= 5

Fixed cost............= 20,000

Breakeven Units=20,000/5= 4,000

b. Find the sales (in units) needed to earn a profit of $15,000

(how do you find the sales in units to earn profits of 15,000?)

Do you increase the selling price or decrease the VC?

The problem below is a sample problem, can you please walk me through this step by step?

Therapeutic Systems sells its products for $8 per unit. It has the following costs:

Rent $120,000

Factory labor $1.50 per unit

Executive salaries $112,000

Raw material $.70 per unit

Separate the expenses between fixed and variable costs per unit. Using this information

and the sales price per unit of $6, compute the break-even point.

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(See attached file for full problem description)

© BrainMass Inc. brainmass.com October 24, 2018, 6:42 pm ad1c9bdddfhttps://brainmass.com/business/business-and-industry-analysis/break-even-analysis-46646

#### Solution Preview

The Hartnett Corporation manufactures baseball bats with Sammy Sosa's autograph

stamped on them. Each bat sells for $13 and has a variable cost of $8.

There is $20,000 in fixed costs involved in the production process.

a. Compute the break-even point in units.

Selling price per item= $ 13

Variable cost per bat= $ 8

Contribution margin= 5

Fixed cost............= 20,000

Breakeven Units=20,000/5= 4,000

b. Find the sales (in units) needed to earn a profit of $15,000

(how do you find the sales in units to earn profits of 15,000?)

Do you increase the selling price or decrease the VC?

If we need to earn a profit, this figure is simply added to the fixed costs and the new number of units found out ( we do not change the selling price or the variable costs since these are given and cannot be ...

#### Solution Summary

The solution has various problems relating to breakeven calculations.

Managerial Accounting: Break Even Point Analysis

Please see attachment.

MSW:4-1

Cost-volume-profit analysis. Patton Company produces one type of sunglasses with the following costs and revenues for the year:

Total Revenues $6,000,000

Total Fixed Costs $2,000,000

Total Variable Costs $2,000,000

Total Quantity Produced and Sold 100,000 Units

Required:

a. What is the selling price per unit?

b. What is the variable cost per unit?

c. What is the contribution margin per unit?

d. What is the break-even point in units?

e. Assume an income-tax rate of 40 percent. Assuming a relevant range, what quantity of units is required for Patton Company to make an after-tax operating profit of $6,000,000 for the year?

MSW:4-2

Break-even and target profits; volume defined in sales dollars. The manager of Hsu's Carryout Express estimates operating costs for the year will total $230,000 for fixed costs.

Required:

a. Find the break-even point in sales dollars with a contribution margin ratio of 40 percent.

b. Find the break-even point in sales dollars with a contribution margin ratio of 20 percent.

c. Find the sales dollars required with a contribution margin ratio of 50 percent to generate a profit of $150,000.

MSW:4-3

CVP analysis with step costs. Techniques Company has one product: customized thumb drives with logos for various businesses. The sales price of $18 remains constant per unit regardless of volume, as does the variable cost of $10 per unit. The company is considering operating at one of the following three monthly levels of operations:

Volume Range

(production and sales) Total

Fixed Costs Increase in Fixed Costs from

Previous Level

Level 1 0-5,000 $ 30,000 --

Level 2 5,001-15,000 50,000 $20,000

Level 3 15,001-30,000 80,000 30,000

Required:

a. Calculate the break-even point(s) in units.

b. If the company can sell everything it makes, should it operate at level 1, level 2, or level 3? Support your answer.

MSW:4-4 Genia Enterprises, Inc. has the capacity to produce 12,000 units per year. Expected operations for the year are

Sales (10,000 units @ $20) $200,000

Manufacturing costs:

Variable $8 per unit

Fixed $40,000

Marketing and administrative costs:

Variable $3 per unit

Fixed $20,000

REQUIRED:

a. What is the expected level of operating profits?

b. Should the company accept a special order for 1,000 units at a selling price of $15 if variable marketing expenses associated with this special order would be $2 per unit? Calculate the incremental profits if the order is accepted.

c. Suppose the company received a special order for 3,000 units at a selling price of $15 with no variable marketing expenses. Calculate the impact on operating profits.