Explore BrainMass

Explore BrainMass

    Breakeven Analysis for Boeing

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Boeing is the largest commercial airplane manufacturer in the world. In 1996, it began development of the 757-300, a 240-passenger plane with a range up to 4,010 miles. First deliveries took place in 1999, at a price of about $70 million per plane.

    Assume that Boeing's annual fixed costs for the 757-300 are $950 million, and its variable cost per airplane is $45 million.

    a) Compute Boeing's break-even point in number of 757-300 airplanes and in dollars of sales.

    b) Suppose Boeing plans to sell forty-two 757-300 airplanes in 2002. Compute Boeing's projected operating profit.

    c) Suppose Boeing increased its fixed costs by $84 million and reduced variable costs per airplane by $2 million. Compute its operating profit if forty-two 757-300 airplanes are sold. Compute the break-even point. Comment on your results.

    d) Ignore requirement 3. Suppose fixed costs do not change, but variable costs increase by 10% before deliveries of 757-300 airplanes begin in 2002. Compute the new break-even point. What strategies might Boeing use to help assure profitable operations in light of increases in variable cost?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:19 pm ad1c9bdddf
    https://brainmass.com/business/finance/breakeven-analysis-for-boeing-39644

    Solution Preview

    a) Compute Boeing's break-even point in number of 757-300 airplanes and in dollars of sales.

    Selling Price= $70 million per plane
    Variable Cost= $45 million per plane

    Therefore contribution margin= $25 million per plane =70-45
    In term of %= 35.71% =25/70

    Annual Fixed Costs= $950 million per year

    Therefore
    Break even quantity= 38 planes =950/25
    Break even sales= $2,660 million =950/35.71%

    Answer
    break-even point
    in number = 38 planes
    and in dollars of sales= $2,660 million

    b) Suppose Boeing plans to sell forty-two 757-300 airplanes in 2002. Compute Boeing's projected operating profit.

    No of ...

    Solution Summary

    Using step by step calculations and explanations, this solution calculates break-even point, operating profit, and strategies Boeing can use to ensure profits.

    $2.49

    ADVERTISEMENT