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Break-even analysis

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The Weaver Watch Company sells watches for \$25; the fixed costs are \$140,000; and variable costs are \$15 per watch.

a.) What is the firm's gain or loss at sale of 8,000 watches? At 18,000 watches?
b.) What is the breakeven point? Illustrate by means of a chart.
c.) What would happen to the breakeven point if the selling price were raised to \$31? What is the significance of this analysis?
d.) What would happen to the breakeven point if the selling price were raised to \$31 but variale costs rose to \$23 a unit?

https://brainmass.com/economics/break-even-analysis/break-even-analysis-134347

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Discussion of basics

Break-even analysis is one of the tools of the managerial accounting, 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). A break even point is typically calculated in order to determine if it would be worthwhile to sell a proposed product, or to try to figure out whether an existing product can be made profitable.If a firm's costs were all variable, the problem of break-even volume would never arise. By having some variable and some fixed costs, the firm must suffer losses up to a given volume.

Useful in decision making
This figure can be used to make advantageous ...

Solution Summary

Break-even analysis is showcased.

\$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