Chapter 19, Problem 19.12EX

a)

To determine

Break-even Point:

It refers to a point in the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even point, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:

$\text{Break-even}\text{point}\text{in}\text{Sales}\left(\text{units}\right)=\frac{\text{Fixed}\text{Costs}}{\text{Contribution}\text{Margin}\text{per}\text{unit}}$

To compute: the break-even number of barrels for the current year.

b)

To determine

To compute: the anticipated break-even number of barrels for the following year.