I need to determine what is meant by the term break-even point in regards to Managerial Accounting? I also need to name 3 approaches to break-even analysis and explain how each approach works.© BrainMass Inc. brainmass.com October 24, 2018, 7:37 pm ad1c9bdddf
Break Even point in managerial accounting:
The break-even point is defined as the point where sales or revenues equal expenses. There is no profit made or loss incurred at the break-even point. This figure is important for anyone that manages a business since the break-even point is the lower limit of profit when setting prices and determining margins. The break-even point becomes very important when calculating a strategy for net profit.
The break even point for a product is the point where total revenue received equals total costs associated with the sale of the product (TR=TC). A break even point is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed attempting to modify an existing product instead so it can be made lucrative. Break-Even Analysis can also be used to analyze the potential profitability of an expenditure in a sales-based business.
Break-Even Analysis can be used in the evaluation of the cost-effectiveness of a new expenditure for a ...
Managerial Accounting: Break Even Point Analysis
Please see attachment.
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
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?
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.
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.
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:
(production and sales) Total
Fixed Costs Increase in Fixed Costs from
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
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
Variable $8 per unit
Marketing and administrative costs:
Variable $3 per unit
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.