Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 5P
a.
Summary Introduction
To calculate: The break-even point (BEP) of Eaton Tool Company.
Introduction:
Break-even point (BEP):
BEP is a no-
b.
Summary Introduction
To calculate: The new break-even point (BEP) of Eaton Tool Company.
Introduction:
Break-even point (BEP):
BEP is a no-profit and no loss situation. It is a point in production at which the expenditure in totality is equal to the income in totality.
c.
Summary Introduction
To explain: The likely profitability in case of a high volume levels.
Introduction:
Break-even point (BEP):
BEP is a no-profit and no loss situation. It is a point in production at which the expenditure in totality is equal to the income in totality.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
Profitability will be less
Profitability will be more
Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of $50 per unit.
a. Compute the break-even point.
Break-even point
b. Ms. Eaton comes up with a new plan to cut fixed costs to $340,000. However, more labor will now be required, which will increas
variable costs per unit to $53. The sales price will remain at $94. What is the new break-even point?
Note: Round your answer to the nearest whole number.
New break-even point
units
Profitability will be less
Profitability will be more
units
c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
The manufacturer of a product that a variable cost of $2.50 per unit and total fixed cost of $125,000 wants to determine the level of output necessary to avoid losses.
a. what level of sales is necessary to break, even if the product is sold for $4.25? what will be the manufacturer's profit or loss on the sales of 1000,00 units?
b.If fixed costs rise to $175,000, what is the new level of sales necessary to break even?
c.If variable cost decline to $2.25 per unit, what is the new level of sales necessary to break even?
d. If fixed cost were to increase to $17,000, while variable cost declined to $2.25 per unit, what is the new break-even level of sales?
e. If a major proportion of fixed costs were noncahs (depreciation), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligation as they come due? Suppose $100,000 of the above fixed cost $125,000 werre depreciation expense. what level of sales would be the cash break-even level of sales?…
Chapter 5 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 5 - Discuss the various uses for break-even analysis....Ch. 5 - What factors would cause a difference in the use...Ch. 5 - Explain how the break-even point and operating...Ch. 5 - Prob. 4DQCh. 5 - What does risk taking have to do with the use of...Ch. 5 - Discuss the limitations of financial leverage....Ch. 5 - Prob. 7DQCh. 5 - Explain how combined leverage brings together...Ch. 5 - Explain why operating leverage decreases as a...Ch. 5 - Prob. 10DQ
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Draw two break-even graphs-one for a conservative...Ch. 5 - Prob. 5PCh. 5 - Shawn Pen & Pencil Sets Inc. has fixed costs of ....Ch. 5 - Calloway Cab Company determines its break-even...Ch. 5 - Prob. 8PCh. 5 - Boise Timber Co. computes its break-even point...Ch. 5 - The Sterling Tire Company’s income statement for...Ch. 5 - Prob. 11PCh. 5 - Healthy Foods Inc. sells 50-pound bags of grapes...Ch. 5 - United Snack Company sells 50-pound bags of...Ch. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Lenow’s Drug Stores and Hall’s Pharmaceuticals...Ch. 5 - The capital structure for Cain Supplies is...Ch. 5 - Sterling Optical and Royal Optical both make glass...Ch. 5 - Prob. 19PCh. 5 - Sinclair Manufacturing and Boswell Brothers Inc....Ch. 5 - DeSoto Tools Inc. is planning to expand...Ch. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Mr. Gold is in the widget business. He currently...Ch. 5 - Delsing Canning Company is considering an...Ch. 5 - Prob. 2WECh. 5 - Now click on "Financials." Look at the Income...Ch. 5 - Prob. 4WECh. 5 - Prob. 5WE
Knowledge Booster
Similar questions
- Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by $18,250 per year. The information they will use to consider these changes is shown here.arrow_forwardSmithson Cutting is opening a new line of scissors forsupermarket distribution. It estimates its fixed cost to be $500.00and its variable cost to be $0.50 per unit. Selling price is expectedto average $0.75 per unit.a) What is Smithson’s break-even point in units?b) What is the break-even point in dollars?arrow_forwardThe manufacturer of a product that has a variable cost of $2.60 per unit and total fixed cost of $136,000 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 $4.60? Round your answer to the nearest whole number. units What will be the manufacturer’s profit or loss on the sales of 89,000 units? Round your answer to the nearest dollar. $ If fixed costs rise to $191,000, 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 $2.30 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 $191,000, while variable costs declined to $2.30 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…arrow_forward
- If the fixed cost becomes $1,250,000, due to the increase in rent and salaries, what would be the new break-even load factor? * JetX Is a company that produces hardware parts for airerafts. The company has an annual fixed cost of $1,000,000 the below table shows the company's costs, revemues, and profits at different levels of production. Please complete the below tabke, knowing that the varinble cost per unit of production is $250. Please use the table to answer the following six questions. Problem Fixed costs Total Total cost Total Profit (or los) Output (Hardware units per year) variable revenue cost $1,00,000 0 $1,000,000 0 -S1,000,000 10,000 15,000 $1,000,000 $4,500,000 20,000 25,000 30,000arrow_forwardManagement believes it can sell a new product for $7.50. The fixed costs of production are estimated to be $4,500, and the variable costs are $3.90 a unit. a. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Round your answers to the nearest dollar Enter zero if necessary. Use a minus sign to enter losses, if any Quantity Variable Costs Fixed Costs 0 500 1,000 $ $ $ S 2,500 $ 3,000 S 1,500 2,000 Total Revenue S Quantity $ $ Total Revenue $ $ $ $ $ $ $ $ $ S Fixed Costs $ $ Total Costs b. Determine the break-even level using the above table and use the Exhibit 19.5 to confirm the break even level of output. Round your answers for the break-even level to the nearest whole number. Round your answers for the fixed costs, variable costs, total costs, and profits (losses) to the nearest dollar. Enter zero if necessary Use a minus sign to enter losses, if any Variable…arrow_forwardXYZ company currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. The company is considering increasing the price of its units to $65 per unit. If the price is changed, how many units will the company need to sell for profit to remain the same as before the price change? Select one: а. 10,000 b. 9,000 c. None of the given answers. d. 7,500 е. 11,250arrow_forward
- SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, andvariable costs are $36 per unit. How will the break-even point in units change in response to each of thefollowing independent changes in selling price per unit, variable cost per unit, or total fixed costs? Use Ifor increase and D for decrease. (It is not necessary to compute new break-even points.) Selling price per unit to $80arrow_forwardXYZ Company sells a product for $250. The variable cost is $150 per unit. The fixed costs are $300,000. The company wants to have a profit of $400,000. How many units do they have to sell to achieve this goal?arrow_forwardSBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, andvariable costs are $36 per unit. How will the break-even point in units change in response to each of thefollowing independent changes in selling price per unit, variable cost per unit, or total fixed costs? Use Ifor increase and D for decrease. (It is not necessary to compute new break-even points.) Total fixed costs to $190,000arrow_forward
- 1. Calculate the break-even sales level in shillings and the number of units that the company would have to sell so as to make a profit Shs.195, 000. 2.A new machine, which is more efficient, is installed. This machine increases the fixed production cost by 20% but reduces the variable production cost per unit by 30%. What is the new break-even point in sales revenue?arrow_forwardKent Company manufactures a product that sells for $54.00. Fixed costs are $341,000 and variable costs are $23.00 per unit. Kent can buy a new production machine that will increase fixed costs by $14,200 per year, but will decrease variable costs by $6.00 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units?arrow_forwardMullis Corporation manufactures DVDs that sell for $5.20. Fixed costs are $35,000 and variable costs are $3.80 per unit. Mullis can buy a newer production machine that will increase fixed costs by $12,500 per year, but will decrease variable costs by $0.50 per unit. What effect would the purchase of the new machine have on Mullis' break-even point in units?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College