The manufacturer of a product that has a variable cost of $2.50 per unit and total fixed cost of $117,000 wants to determine the level of output necessary to avoid losses. What level of sales is necessary to break-even if the product is sold for $4.35? Round your answer to the nearest whole number. units What will be the manufacturer’s profit or loss on the sales of 104,000 units? Round your answer to the nearest dollar. $ If fixed costs rise to $164,000, what is the new level of sales necessary to break-even? Round your answer to the nearest whole number. units If variable costs decline to $2.25 per unit, what is the new level of sales necessary to break-even? Round your answer to the nearest whole number. units
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
The manufacturer of a product that has a variable cost of $2.50 per unit and total fixed cost of $117,000 wants to determine the level of output necessary to avoid losses.
- What level of sales is necessary to break-even if the product is sold for $4.35? Round your answer to the nearest whole number.
units
What will be the manufacturer’s profit or loss on the sales of 104,000 units? Round your answer to the nearest dollar.$
- If fixed costs rise to $164,000, what is the new level of sales necessary to break-even? Round your answer to the nearest whole number.
units
- If variable costs decline to $2.25 per unit, what is the new level of sales necessary to break-even? Round your answer to the nearest whole number.
units
- If fixed costs were to increase to $164,000, while variable costs declined to $2.25 per unit, what is the new break-even level of sales? Round your answer to the nearest whole number.
units
- If a major proportion of fixed costs were noncash (
depreciation ), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligations as they come due? Suppose $91,000 of the above fixed costs of $117,000 were depreciation expense. What level of sales would be the cash break-even level of sales? Use the initial variable cost in your calculations. Round your answer to the nearest whole number.units
Step by step
Solved in 2 steps
