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Breakeven point, Operating Profits and Currency conversion

1. Howard Beal Co. manufactures molds for casting aluminum alloy test samples. Fixed costs amount to $20,000 per year.
Variable costs for each unit manufactured are $16. Sales price per unit is $28.
a. What is the contribution margin of the product?
b. Calculate the breakeven point in unit sales and dollars
c. What is the operating profit (loss) if the company manufactures and sells
(i) 1,500 units per year
(ii) 3,000 units per year
d.Plot a breakeven chart using the foregoing figures

2. John is planning on purchasing his dream car directly from the manufacturer in Germany. In order to do so, he must first convert his dollars to euros. His dream car has a price tag of 55,150 euros. How much does he need in U.S. dollars to purchase this car if the exchange rate is .9800 euros to the dollar?

3. Mrs.Pittner owns 100 shares of stock in Nokia valued at 16.5 euros per share. What is the value (in U.S. dollars) of Mrs. Pittner's share of stock when the exchange rate is
a. .9188? =1$
b. .70? = 1$
c. 1.212? = 1$

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Solutions :
1.
a. What is the contribution margin of the product?
Contrubution Margin=Sales Price-Variable Cost
Sale Price=$28.00
Variable Cost=$16.00
Contrubution Margin=$12.00

b. Calculate the breakeven point in unit sales and dollars
Break even Sales in units=Fixed Costs/Contribution Margin
Fixed Costs=$20,000
Contribution Margin=$12.00
Beakeven sales in units=1,667

Breakeven sales in dollars=Breakeven Sales in units*Price
Breakeven sales in dollars=$46,666.67

c. What is the operating profit (loss) if the company manufactures and sells
(i) 1,500 units per year
(ii) 3,000 units per year
1) Revenue on sale of 1500 ...

Solution Summary

There are three problems. Solution to first problem explains the steps to find out breakeven point and opertaing profit/loss at different level of activity. Solution to other problems involve currency conversion of one currency into other currency.

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