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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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Past Break even units = XL-709 - 14000 Units

                                            CD-918 -  35000 Units

Oriole Industries sells two electrical components with the following characteristics. Fixed costs for the company are $ 364,000 per year. XL-709 CD-918 Sales price $ 35 $ 48 Variable cost 29 40 Sales volume 98,000 units 245,000 units
Transcribed Image Text:Oriole Industries sells two electrical components with the following characteristics. Fixed costs for the company are $ 364,000 per year. XL-709 CD-918 Sales price $ 35 $ 48 Variable cost 29 40 Sales volume 98,000 units 245,000 units
Oriole's vice president of sales has determined that due to market changes, the sales price of component XL-709 can be increased to $ 37 with no impact on sales volume. What will be Oriole's new breakeven point in units? XL-709 CD-918 New Break even point in units
Transcribed Image Text:Oriole's vice president of sales has determined that due to market changes, the sales price of component XL-709 can be increased to $ 37 with no impact on sales volume. What will be Oriole's new breakeven point in units? XL-709 CD-918 New Break even point in units
Expert Solution
Step 1

If selling price of the component XL-709 can be increased to $37 with no impact on sales volume then new break even point in units-

  XL-709 CD-918
New break even point 13000 units 32500 units 

Working Note:

sales units mixed ratio electrical equipments=98000:245000=1:2.5 

By using equation method,XL-790 sold units assumed as X

At break even point profit is zero

so operating income=contribution margin of XL-790 +contribution margin of CD-918-fixed cost

$0=($37-$29)X +($48-$40)X - $364000

$364000=$8X + $20X

$28X=$364000

X=13000

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