Chapter 21, Problem P21.54APGA

To determine

Concept Introduction:

Breakeven point: It is that point at which the company expects no profit or no loss. At this point, the company’s total revenues and total costs are equal.

Variable and Fixed costs: Variable costs are those costs which are incurred only when units are produced like direct material, direct labor, etc, while the fixed costs are incurred irrespective of the production like salaries, rent, etc.

Net operating income: It refers to the amount earned after meeting all the costs, i.e., fixed and variable costs.

Contribution margin ratio: It is computed as the percentage of sales. The contribution is arrived at after deducting the variable costs from the sales. Its mathematical formula is (net sales − variable costs) / net sales. It reflects the left-over earnings to pay the fixed costs.

Requirement: 1

The missing values of different companies.

Requirement:2

To determine

The Company which has the lowest breakeven point.

Requirement:3

To determine

The causes of low breakeven point.