Let: BES= break-even sales, R = revenue per unit, F = fixed costs, V = variable cost per unit, CMR = contribution ratio, CM =contribution margin per unit, S x R = sales dollars, S = sales in units [(S x R) - (F/CMR)]/(S x R) is the:break even point in unitsbreak even point in salessales mix compositemargin of safety0000

Break-even sales shows the amount of sales to generate 0 net income. At this point, total revenue is…

Answered: Let: BES= break-even sales, R = revenue…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 7P

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If the sales mix in a multi-product environment shifts to a higher volume in low contribution margin products, the break-even point will ____________________________________ . A. remain unchanged because all products are included in the calculation of break-even B. increase because the low contribution margin products have little effect on break-even C. increase because the per composite unit contribution margin will decrease D. decrease because the per composite unit contribution margin will increase
Contribution Margin Ratio, Break-Even Sales, Operating Leverage Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows: Required: 1. Compute the contribution margin ratio for the mailboxes. 2. How much revenue must Elgart earn in order to break even? 3. What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 15%? 4. CONCEPTUAL CONNECTION Suppose that management has decided to give a 4% commission on all sales. The projected income statement does not reflect this commission. Recompute the contribution margin ratio, assuming that the commission will be paid. What effect does this have on the break-even point? 5. CONCEPTUAL CONNECTION If the commission is paid as described in Requirement 4, management expects sales revenues to increase by 80,000. How will this affect operating leverage? Is it a sound decision to implement the commission? Support your answer with appropriate computations.
Would each of the following increase, decrease, or have an indeterminant effect on a firms break-even point (unit sales)? a. The sales price increases with no change in unit costs. b. An increase in fixed costs is accompanied by a decrease in variable costs. c. Variable labor costs decline; other things are held constant.
The break-even point in CVP analysis is defined as the point 1) where output units equal input units. 2) where total revenue equals fixed costs. 3) where revenues less variable costs equal operating income. 4) where the unit contribution margin equals the selling price less the unit variable cost. 5) where total revenue equals total costs.
Sometimes management prefers that the break-even point be expressed in sales dollars rather than units. This can be accomplished by using the contribution margin per unit Select one: O True O False
What is the correct choice? Datamatix Company has gathered the following data: Unit Sales Price Unit Variable Costs Unit Sales Product 1 $18.00 $10.00 24,500 Product 2 27.00 17.00 17,500 Product 3 35.00 28.00 28,000 Fixed costs are $233,280. The weighted-average breakeven point is a. 34,500 units. b. 28,800 units. c. 25,200 units. d. 29,900 units.
Which of the following formulas is used to calculate break-even point in units? a.Break-even point in units = Total fixed costs / (Price − Unit variable cost) b.Break-even point in units = Total costs / Unit contribution margin c.Break-even point in units = Sales / Unit variable cost d.Break-even point in units = Sales / Fixed costs
Please reject this A firm manufactures a product that sells for $16 per unit. Variable cost per unit is $8 and fixed cost per period is $1760 Capacity per period is 1400 units (a) Develop an algebraic statement for the revenue function and the cost function (b) Determine the number of units required to be sold to break even. (c) Compute the break-even point as a percent of capacity (d) Compute the break-even point in sales dollars (a) The revenue function is TR= (Type an expression using x as the variable Do not inciude the $ symbol in your answer) The cost function is TC (Type an expression using x as the variable Do not includo the $ symbol in your answer) (b) The number of units required to be sold to break even is units (Round up to the nearest whole number) (c) The break-even point as a porcent of capacity is% (Round to two decimal places as needed.) (d) The break-even point in sales dollars is $ (Round to the nearest cent as needed.)
Quincy Corporation is trying to determine what type of cost they are observing. As sales increased the total amount this cost increased also. It looks as if it stays fixed in percentage terms at 20% of sales even as sales vary. Based on this relationship, would you say this cost is a fixed cost, variable cost, mixed cost, or a stepped cost? View keyboard shortcuts
The break-even point in unitsis calculated as (fill in the blank) divided by the Contribution Margin in Units. (See your Chapter 20 notes, page 13) Total sales revenue Sales revenue per unit Total variable costs Fixed cost per unit Variable cost per unit Total fixed costs Contribution margin ratio
2. What is the expected contribution margin ratio? Round to the nearest whole percent. 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to the nearest whole percent.) 6. Determine the operating leverage. Round to one decimal place.
g) Briefly explain the impact of each of the following scenarios on the contribution margin per unit and the break-even point:(i) Sales volume increases(ii) Total fixed cost decreases(iii) Selling price per unit increases(iv) Variable cost per unit increases

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