BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

Solutions

Chapter
Section
BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
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

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

How can sensitivity analysis be used in conjunction with CVP analysis?

Managerial Accounting: The Cornerstone of Business Decision-Making

What is employee fraud?

Accounting Information Systems

What are the major functions of packaging?

Foundations of Business (MindTap Course List)

Would you agree that computerized corporate planning models were a fad during the 1990s but that because of a n...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

(Cooperatives) How do cooperatives differ from typical businesses?

ECON: MICRO4 (New, Engaging Titles from 4LTR Press)

What is meant by balanced measures?

Cornerstones of Cost Management (Cornerstones Series)