PR 21-3A Break-even sales and cost-volume-profit chart OBJ. 3, 4 For the coming year, Cleves Company anticipates a unit selling price of $100, a unit vari- able cost of $60, and fixed costs of $480,000. Instructions 1. Compute the anticipated break-even sales (units). 2. Compute the sales (units) required to realize a target profit of $240,000. 3. Construct a cost-volume-profit chart, assuming maximum sales of 20,000 units within the relevant range. 4. Determine the probable income (loss) from operations if sales total 16,000 units.
PR 21-3A Break-even sales and cost-volume-profit chart OBJ. 3, 4 For the coming year, Cleves Company anticipates a unit selling price of $100, a unit vari- able cost of $60, and fixed costs of $480,000. Instructions 1. Compute the anticipated break-even sales (units). 2. Compute the sales (units) required to realize a target profit of $240,000. 3. Construct a cost-volume-profit chart, assuming maximum sales of 20,000 units within the relevant range. 4. Determine the probable income (loss) from operations if sales total 16,000 units.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please read instructions on Image 1, and please answer questions on page 2.
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Transcribed Image Text:PR 21-3A Break-even sales and cost-volume-profit chart
OBJ. 3, 4
For the coming year, Cleves Company anticipates a unit selling price of $100, a unit vari-
able cost of $60, and fixed costs of $480,000.
Instructions
1. Compute the anticipated break-even sales (units).
2. Compute the sales (units) required to realize a target profit of $240,000.
3. Construct a cost-volume-profit chart, assuming maximum sales of 20,000 units within
the relevant range.
4. Determine the probable income (loss) from operations if sales total 16,000 units.
Transcribed Image Text:Question 1
Break even Sales (Units)
Question 2
Sales (Units)
Skip Question 3
Question 4
Income from operations
Expert Solution
Step 1 Introduction
Contribution Margin :— It is the difference between sales and variable cost.
Break Even Point (BEP) :— It is the point of production where total cost is equal to total revenue. At this point, total contribution margin is equal to total fixed cost.
It is calculated by dividing total fixed cost by contribution margin per unit.
BEP = Fixed Cost/Contribution Margin per unit
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