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break-even point

break-even point

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Selling price per unit (package of two CDs) Variable costs per unit: Direct material $25.00 $ 8.20 Direct labor Manufacturing overhead Selling expenses Total variable costs per unit Annual fixed costs: 4.00 6.00 1.60 $19.80 Manufacturing overhead Selling and administrative Total fixed costs Forecasted annual sales volume (140,000 units) $3,500,000 In the following requirements, ignore income taxes. $ 288,000 414,000 $ 702,000 Required: 1. What is Surreal Sound's break-even point in units? 2. What is the company's break-even point in sales dollars? 3. How many units would Surreal Sound have to sell in order to earn $390,000? 4. What is the firm's margin of safety? 5. Management estimates that direct-labor costs will increase by 10 percent next year. How many units will the company have to sell next year to reach its break-even point?
Transcribed Image Text:Selling price per unit (package of two CDs) Variable costs per unit: Direct material $25.00 $ 8.20 Direct labor Manufacturing overhead Selling expenses Total variable costs per unit Annual fixed costs: 4.00 6.00 1.60 $19.80 Manufacturing overhead Selling and administrative Total fixed costs Forecasted annual sales volume (140,000 units) $3,500,000 In the following requirements, ignore income taxes. $ 288,000 414,000 $ 702,000 Required: 1. What is Surreal Sound's break-even point in units? 2. What is the company's break-even point in sales dollars? 3. How many units would Surreal Sound have to sell in order to earn $390,000? 4. What is the firm's margin of safety? 5. Management estimates that direct-labor costs will increase by 10 percent next year. How many units will the company have to sell next year to reach its break-even point?
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