Compute the break-even point for a single-product company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Learning Objective 05-P2: Compute the break-even point for a single-product company.
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A company’s break-even point for a period is the sales volume at which total revenues equal total costs. To compute a break-even point in terms of sales units, we divide total fixed costs by the contribution margin per unit. To compute a break-even point in terms of sales dollars, divide total fixed costs by the contribution margin ratio.
Cost-Volume-Profit Chart
Current Time 0:00
/
Duration 1:56
1x
Knowledge Check 01
Based on a CVP graph, select the correct drop-down answer for each question.
Transcribed Image Text:Required information
Learning Objective 05-P2: Compute the break-even point for a single-product company.
A company's break-even point for a period is the sales volume at which total revenues equal total costs. To compute a
break-even point in terms of sales units, we divide total fixed costs by the contribution margin per unit. To compute a
break-even point in terms of sales dollars, divide total fixed costs by the contribution margin ratio.
Cost-Volume-Profit Chart
Dollars
Maximum productive capacity = 1,800 units Sales = $180,000
$1800,000
$160,000
$140,000
$120,000
$100,000
Largest Income = $30,000
$80,000
Maximum productive capacity = 1,800 units
Break-Even Point (sales
of 800 units or $80,000)
Total Sales
Total Costs
Transcribed Image Text:Required information
30s
Dollars
$1800,000
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
0
Maximum productive capacity = 1,800 units
Break-Even Point (sales
of 800 units or $80,000)
Loss Area
200
400
0:00 / 1:56
Total Sales
Total Costs
Profit Area
600 800 1,000 1,200 1,400 1,600 1,800
Volume (units produced and sold
Knowledge Check 01
Based on a CVP graph, select the correct drop-down answer for each question.
CC
B
Line that starts at zero on the vertical axis with a slope based on the selling price per unit.
Line that starts at the fixed cost level on the vertical axis and increases based on the slope of the variable cost per unit.
Expert Solution
Step 1
Given in the question:
Maximum productive capacity = 1800 units
Break-even point as per sales = 800 units
Break-even point as per dollars = $80,000
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