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Break Even Analysis

Total Fixed Cost \$600,000
Plant Capacity 70,000 units
Desired Profit \$150,000
Unit Price \$50
Variable Cost \$30
Tax Rate 25%

With this information, calculate the answers to the following questions:

1) Calculate what the total income the company must get its sales to cover the Total Fixed Cost, Total Variable Costs and the expected gain (Desired Profit).

2) What is the number of units to be produced and sold for the total costs are equal to total income.

3) What is the total income that the company should have with their sales to cover the total costs for the payment of taxes and the expected gain.

4) What is the plant capacity used when the firm produces the number of units that allows you to recover total costs, payment of taxes and the expected gain.

5) Check whether the total income received in # 3 was sufficient to cover the Total Fixed Cost Total Variable Cost and Payment of Taxes and planned profit (Desired Profit). (Perform the corresponding demo)

6) Calculate the profit which would be needed before and after payment of taxes if the company would use the plant that becomes available after it arrives at Break Even.

7) What is the new price to be determined for each unit if the plant capacity used to derive the total income earned in # 3 is reduced by 5%.

8) What is the additional gain before and after payment of taxes which the company can get if you used the plant capacity still available after this was his expected profit after the payment of tax. (Desired Profit)

9) How many units should produce and sell the company for the income received to cover all costs, taxes and the expected gain.

Solution Summary

Break Even Analysis is assessed.

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