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Accounting: Break-even analysis.

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13-6 UBC Company fixed costs are $10,000 per year and variable costs are $20 per unit. Sales price is $28 per unit.
a) What is the contribution margin of the product?
Answer: $8.00
b) Calculate the breakeven point in unit sales and dollars.
Answer: Breakeven in units is 1,250
Breakeven in dollars = $35,000.00
c) What is the operating profit (loss) at:
i) 1,500 units per year?
Answer: $2,000.00 .
ii) 3,000 units per year?
Answer: $14,000.00
d) Plot a breakeven chart using the foregoing figures.

21-4 The following is a list of currency exchange rates for selected countries:
$U.S. a) $U.S. b)
Country Currency Equivalent per ? $100,000
Britain Pound 1.6428 1.4090 60,872 Pounds
Mexico Peso 0.0731 1,367,989 Pesos
Canada Dollar 0.8910 112,233 Dollars
Japan Yen 0.0107 9,345,794 Yen
Europe Euro 1.4090 70,972 Euros

21-13 Sony sells its 50-inch TV in Japan for ¥230,000. In the U.S. this same TV sells for $2,000.
What should the exchange rate be in order for purchasing point parity to exist?
Answer: 230,000 yen equals $2,000 at exchange rate $0.0087 per yen
115.0000 yen per $U.S.

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Solution Summary

The problem set deals with topics under accounting: Break-even, contribution margin etc.

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Managerial Accounting: Break Even Point Analysis

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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:

Volume Range
(production and sales) Total
Fixed Costs Increase in Fixed Costs from
Previous Level
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
Manufacturing costs:
Variable $8 per unit
Fixed $40,000
Marketing and administrative costs:
Variable $3 per unit
Fixed $20,000
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.

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