Purchase Solution

Break-even point;dollar sales volume;project effect

Not what you're looking for?

Ask Custom Question

Rocky Mount Metals Company manufactures an assortment of wood-burning stoves. The average selling price for the various units is $500. The associated variable cost is $350 per unit. Fixed costs for the firm average $180,000 annually.

a. What is the break-even point in units for the company?

b. What is the dollar sales volume the firm must achieve to reach the break-even point?

c. What is the degree of operating leverage for a production and sales level of 5,000 units for the firm? (Calculate to three decimal places.)

d. What will be the projected effect on earnings before interest and taxes if the firm's sales level should increase by 20 percent from the volume noted in part c?

(Keown. Foundations of Finance: The Logic and Practice of Financial Management, 6th Edition. Pearson Learning Solutions 16.18).
<vbk:0558414729#outline(16.18)>

Purchase this Solution
Solution Summary

This post shows how to calculate break-even point , dollar sales volume, degree of operating leverage for a production and project effect.

Solution Preview

Selling price= $500 per unit
Variable cost= $350 per unit
Fixed costs = $180,000

a. What is the break-even point in units for the company?
Break Even Point = Fixed Cost / (Selling Price - Variable Price)
= 180000/(500-350)
= ...

Purchase this Solution
Free BrainMass Quizzes
Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

View More Free Quizzes
Related BrainMass Solutions

  • Setting up a business

    (B) 40% The break-even point in sales dollars is: (A) $60,000 If your friend expects to sell no more than 15,000 sandwiches per year, then: (A) This provides an example of finding break-even point and fixed costs.

  • Managerial Accounting Practices: Example Problems

    Below the break-even point, what does every dollar of contribution margin go toward? Above the break-even point, what does every dollar of contribution margin go toward?

  • Various uses for break-even analysis

    Break-even analysis is a device for determining the point at which sales will just cover total costs or the break even point for a product is the point where total revenue received equals total costs (TR=TC).

  • The solution to C-V-p analysis

    What sales volume is needed to achieve the budgeted profit or to cover the additional fixed charges from the proposed new project. Break even analysis Break even point is the point at which gains equal losses.

  • Break Even Point and Capital Budgeting

    What is the dollar sales volume the firm must achieve to reach the break-even point? Dollar sales volume= BEPin units*sales price 760000 c.)

  • Breakeven Analysis and operating profits

    Calculate the annual break-even point in dollar sales and in unit sales for    Store 36.

  • What is cost-volume-profit analysis?

    What sales volume is needed to achieve the budgeted profit or to cover the additional fixed charges from the proposed new project. Break even analysis Break even point is the point at which gains equal losses.

  • Cost Volume Profit Analysis - CompTronics

    break-even point.

  • Findind break even sales

    What is the break-even point in units for the company? b. What is the dollar sales volume the firm must achieve in order to reach the break-even point? c.

View More Related Solutions