
Break-even Point:
The break-even point is the amount of sales that does not result in any loss or profit for a company. It is used for the various cost control goals as it covers the total cost of operation that would be incurred.
To identify: The break-even point.

Explanation of Solution
In order to calculate the break- even point, contribution margin needs to calculate.
Given,
The sale price per unit is $90.
The variable cost per unit is $36.
Formula to calculate the contribution margin,
Substitute $90 for sales per unit and $36 for variable cost per unit.
The contribution margin per unit is $54.
The fixed cost is $162,000. (Given)
The contribution margin per unit is $54. (Calculated in equation (1))
Formula to calculate the break-even point,
Substitute $162,000 for fixed cost and $54 for contribution margin per unit.
Hence, the break-even point is 3,000 units.
1. Total fixed cost increased to $190,000.
In order to calculate the break- even point, contribution margin needs to calculate.
The fixed cost is $190,000. (Given)
The contribution margin per unit is $54. (Calculated in equation (1))
Formula to calculate the break-even point,
Substitute $190,000 for fixed cost and $54 for contribution margin per unit.
Hence, the break-even point is 3,519 units. As the break-even point has increased the answer will be (I).
2. Variable cost decrease to $34.
In order to calculate the break- even point, contribution margin needs to calculate.
Given,
The sale price per unit is $90.
The variable cost per unit is $34.
Formula to calculate the contribution margin,
Substitute $90 for sales per unit and $34 for variable cost per unit.
The contribution margin per unit is $56.
The fixed cost is $162,000. (Given)
The contribution margin per unit is $56. (Calculated in equation (2))
Formula to calculate the break-even point,
Substitute $162,000 for fixed cost and $56 for contribution margin per unit.
Hence, the break-even point is 2,893 units. As the break-even point has increased the answer will be (D).
3. Selling price per unit decrease to $80.
In order to calculate the break- even point, contribution margin needs to calculate.
Given,
The sales per unit is $80.
The variable cost per unit is $36.
Formula to calculate the contribution margin,
Substitute $80 for sales per unit and $36 for variable cost per unit.
The contribution margin per unit is $44.
The fixed cost is $162,000. (Given)
The contribution margin per unit is $44. (Calculated in equation (3))
Formula to calculate the break-even point,
Substitute $162,000 for fixed cost and $44 for contribution margin per unit.
Hence, the break-even point is 3,682 units. As the break-even point has increased the answer will be (I).
4. Variable cost increased to $67.
In order to calculate the break- even point, contribution margin needs to calculate.
Given,
The sales per unit is $90.
The variable cost per unit is $67.
Formula to calculate the contribution margin,
Substitute $90 for sales per unit and $67 for variable cost per unit.
The contribution margin per unit is $23.
The fixed cost is $162,000. (Given)
The contribution margin per unit is $23. (Calculated in equation (4))
Formula to calculate the break-even point,
Substitute $162,000 for fixed cost and $23 for contribution margin per unit.
Hence, the break-even point is 7,044 units. As the break-even point has increased the answer will be (I).
5. Total fixed cost decreased to $150,000.
In order to calculate the break- even point, contribution margin needs to calculate.
The fixed cost is $150,000. (Given)
The contribution margin per unit is $54. (Calculated in equation (1))
Formula to calculate the break-even point,
Substitute $150,000 for fixed cost and $54 for contribution margin per unit.
Hence, the break-even point is 2,778 units. As the break-even point has increased the answer will be (D).
6. Selling price increased to $120
In order to calculate the break- even point, contribution margin needs to calculate.
Given,
The sale price per unit is $120.
The variable cost per unit is $36.
Formula to calculate the contribution margin,
Substitute $120 for sales per unit and $36 for variable cost per unit.
The contribution margin per unit is $84.
The fixed cost is $162,000. (Given)
The contribution margin per unit is $44. (Calculated in equation (5))
Formula to calculate the break-even point,
Substitute $162,000 for fixed cost and $84 for contribution margin per unit.
Hence, the break-even point is 1,929 units. As the break-even point has increased the answer will be (D).
Want to see more full solutions like this?
Chapter 5 Solutions
Managerial Accounting
- incoporate the accounting conceptual frameworksarrow_forwarda) Define research methodology in the context of accounting theory and discuss the importance of selecting appropriate research methodology. Evaluate the strengths and limitations of quantitative and qualitative approaches in accounting research. b) Assess the role of modern accounting theories in guiding research in accounting. Discuss how contemporary theories, such as stakeholder theory, legitimacy theory, and behavioral accounting theory, shape research questions, hypotheses formulation, and empirical analysis. Question 4 Critically analyse the role of financial reporting in investment decision-making, emphasizing the qualitative characteristics that enhance the usefulness of financial statements. Discuss how financial reporting influences both investor confidence and regulatory decisions, using relevant examples.arrow_forwardFastarrow_forward
- CODE 14 On August 1, 2010, Cheryl Newsome established Titus Realty, which completed the following transactions during the month: a. Cheryl Newsome transferred cash from a personal bank account to an account to be used for the business in exchange for capital stock, $25,000. b. Paid rent on office and equipment for the month, $2,750. c. Purchased supplies on account, $950. d. Paid creditor on account, $400. c. Earned sales commissions, receiving cash, $18,100. f. Paid automobile expenses (including rental charge) for month, $1,000, and miscel- laneous expenses, $600. g. Paid office salaries, $2,150. h. Determined that the cost of supplies used was $575. i. Paid dividends, $2,000. REQUIREMENTS: 1. Determine increase - decrease of each account and new balance 2. Prepare 3 F.S: Income statement; Retained Earnings Statement; Balance Sheet Scanned with CamScannerarrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2024 on the assets it placed in service in 2024, assuming no bonus depreciation? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Maximum total depreciation deduction (including §179 expense)arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. b. What is the allowable depreciation on Evergreen's property in the current year if Evergreen does not elect out of bonus depreciation and elects out of §179 expense?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





