806Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $200 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $270,000, up to a maximum capacity of 700,000 yards of rope. Forecasted variable costs are $140 per 100 yards of XT rope. Required Estimate Product XT’s break-even point in terms of (a) sales units and (b) sales dollars. Check (1a) Break-even sales, 4,500 units Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.
806Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $200 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $270,000, up to a maximum capacity of 700,000 yards of rope.
Required
Estimate Product XT’s break-even point in terms of (a) sales units and (b) sales dollars.
Check (1a) Break-even sales, 4,500 units
Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.
The Break-even point is that point where the company neither earns any profit nor incurs any loss.
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