Break Even Analysis
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Problem 22-2A: CVP analysis and charting L.O. P2, P3
Xcite Equipment Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year's plans call for a $190 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $300,000, up to a maximum capacity of 700,000 yards. Forecasted variable costs are $170 per 100 yards of XT rope.
Required:
1.
Estimate Product XT's break-even point in terms of (a) sales units and (b) sales dollars. (Omit the "$" sign in your response).
(a)
Break-even in sales units
Units
(b)
Break-even in sales dollars
$
2.
Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point. (Omit the "$" sign in your response. Leave no cells blank - be certain to enter "0" wherever applicable.)
XCITE EQUIPMENT CO.
Contribution Margin Income Statement (at Break-Even) ? Product XT
Sales
$
Variable costs
Contribution margin
Fixed costs
Net Income (Loss)
$
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Solution Summary
The solution answers the questions below in detail.
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Answer 1:
To calculate the breakeven quantity use the following formula:
190xQ = 300,000 + ...
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