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CVP Analysis-Break even sales

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Each problem is unrelated to the others.

1. Given: Selling price per unit, $20; total fixed expenses, $5,000; variable expenses per unit, $15. Find break-even sales in units.

2. Given: Sales, $40,000; variable expenses, $30,000; fixed expenses, $7,500; net income, $2,500. Find break-even sales in dollars.

3. Given: Selling price per unit, $30; total fixed expenses, $33,000; variable expenses per unit, $14. Find total sales in units to achieve a profit of $7,000, assuming no change in selling price.

4. Given: Sales, $50,000; variable expenses, $20,000; fixed expenses, $20,000; net income, $10,000. Assume no change in selling price; find net income if activity volume increases 10%.

5. Given: Selling price per unit, $40; total fixed expenses, $80,000; variable expenses per unit, $30. Assume that variable expenses are reduced by 20% per unit, and the total fixed expenses are increased by 10%. Find the sales in units to achieve a profit of $20,000, assuming no change in selling price.

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Solution Summary

There are five problems related to CVP analysis. Solutions describes the steps to determine sales required to break even and meet the targetted profit.

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Solution

1. Given: Selling price per unit, $20; total fixed expenses, $5,000; variable expenses per unit, $15. Find break-even sales in units.

Contribution margin per unit = Selling Price - Variable Cost per unit
=20-15
=$5
Break even Sales in units = Fixed Costs/contribution margin per unit
=5000/5
= 1000 units

2. Given: Sales, $40,000; variable expenses, $30,000; fixed expenses, $7,500; net income, $2,500. Find break-even sales in dollars. ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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