Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883



Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Break-even analysis
The Garden Club of Palm Springs, California, collected recipes from members and published a cookbook entitled Desert Dishes. The book will sell for $40 per copy. The chairperson of the cookbook development committee estimated that the club needed to sell 8.000 hooks to break even on its $40,000 investment. What is the variable cost per unit assumed in the Garden Club's analysis?

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.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:

Contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

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) 

To Calculate:

The Variable cost per unit


The Variable cost per unit is calculated as follows:

    Selling Price per unit (A) $ 40
    Number of breakeven units (B) 8,000
    Breakeven sales (C) = (A*B) $ 320,000

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

Some income from capital is taxed twice. Explain.

Principles of Macroeconomics (MindTap Course List)

Why is it important to understand buying behavior?

Foundations of Business (MindTap Course List)

If a typical firm reports 20 million of retained earnings on its balance sheet, could its directors declare a 2...

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

What is a bill of activities?

Cornerstones of Cost Management (Cornerstones Series)