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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?
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?
ii) 3,000 units per year?
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
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.

#### Solution Summary

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

\$2.19

## Managerial Accounting: Break Even Point Analysis

MSW:4-1
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

Required:
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?

MSW:4-2
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.

Required:

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.

MSW:4-3
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

Required:

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