   Chapter 11, Problem 11.13E

Chapter
Section
Textbook Problem

Break-even sales Currently, the unit selling price of a product is $1,350, the unit variable cost is$900, and the total fixed costs are $810,000. A proposal is being evaluated to increase the unit selling price to$1,400. a.Compute the current break-even sales (units). b.Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis:

The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Breakeven Point:

The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no profits no loss. Breakeven point in $is calculated with the help of following formula: Breakeven point (units) = Total Fixed Costs(Sales Price Per unit -Variable Cost per unit) Requirement-a: To Calculate: The Current Breakeven sales units Explanation The Current Breakeven sales unit is calculated as follows:  Selling Price per unit (A)$ 1,350 Variable Cost per unit (B) $900 To determine Concept Introduction: Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit. Breakeven Point: The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no profits no loss. Breakeven point in$ is calculated with the help of following formula:

Breakeven point (units) = Total Fixed Costs(Sales Price Per unit -Variable Cost per unit)

Requirement-b:

To Calculate:

The Anticipated Breakeven sales units

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