8.7 Consider the following information for a big-screen television distributor:

Sales price per TV = $1,500
Variable costs per TV = $1,100
Fixed costs per year = $120,000
Depreciation per year = $20,000
Tax rate = 35%
How many units must the distributor sell in a given year to break even (in terms of accountingprofit)?

8.12 J.'s Toys Inc. just purchased a $200,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its five-year economic life. Each toy sells for $25. The variable cost per toy is $5, and the firm incurs fixed costs of $350,000 each year. The corporate tax rate for the company is 25 percent. The appropriate discount rate is 12 percent. What is the present value break-even point for the project?

Solution Preview

8.7

Consider the following information for a big-screen television distributor:

Sales price per TV = $1,500
Variable costs per TV = $1,100
Fixed costs per year = $120,000
Depreciation per year = $20,000
Tax rate = 35%
How many units must the distributor sell in a given year to break even (in terms of accounting profit)?

Selling price= $1,500 per TV
variable cost= $1,100 per TV
Contribution= $400 per TV

Fixed Cost + Depreciation= $140,000 =120000+20000

Therefore, Breakeven units= 350 =140000/400

Answer: 350 TV sets

8.12
J.'s Toys Inc. just purchased a $200,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its five-year economic ...

Solution Summary

The solution provides answers to two questions on break even.

What is a break-even point? If an organization's fixed costs increase, what happens to the break-even point? How can the break-even point be lowered? Why is the break-even analysis an important tool for management? When evaluating a company, how might this information be used?

Green plastics manufactures garden tool sets. Total fixed costs are estimated at $64,800. The variable cost per set is $2.95 and the selling price is $8.60. What is the breakeven point?
a.12,000 b.12,876 c.11,469 d.12,820 e. not given

What happens at a company's break-even point? How can you compute the break-even point for a company? How can a change in costs for a product or service be incorporated into the break-even calculation?

Winny's Office Furniture has a contribution margin ratio of 16%. If fixed costs are $187,800, how many dollars of revenue must the company generate in order to reach the break-even point?

See attached file for full problem description.
The C-V-P Equation
The company sells lawnmowers for $895 each. The variable cost per lawnmower is $20. The company's monthly fixed costs are $84,500. Using the C-V-P equation, compute the amount of profit the company will have for a month in which the company sells 375 lawnmo

You are opening up a restaurant, initial cost of opening the restaurant is $80,000, plus $4,000 monthly expenses. Estimate
f(x)=xsquared - x + 5 to be the anticipated monthly profit of the restaurant in hundreds of dollars during the xth month of business. To breakeven your total profit from the opening of the restaurant must

Thorpe Corporation sells products for $15 each that have variable costs of $10 per unit. Thorpe's annual fixed cost is $300,000.
User the per unit contribution margin approach to determine the break-even point in units and dollars.

If a firm has a break-even point of 20,000 units and the contribution margin on the firm's single product is $3.00 per unit and fixed costs are $60,000, what will the firm's net income be with sales of 30,000 units?