   Chapter 11, Problem 11.4.3P

Chapter
Section
Textbook Problem

Break-even sales and cost-volume-profit graph Last year, Ridgecrest Inc. had sales of \$3,200,000, based on a unit selling price of (400. The variable cost per unit was \$240, and fixed costs were \$1,088,000. The maximum sales within Ridgecrest Inc.'s relevant range are 10.000 units. Ridgecrest Inc. is considering a proposal to spend an additional \$160,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity. Instructions Construct a cost-volume-profit graph indicating the break-even sales for the current year, assuming that a noncancelable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or Other costs. Verify your answer using the break-even equation.

To determine

Concept Introduction:

Cost volume profit graph: This graph shows the sales, total cost and fixed cost and this help us to identify our breakeven point on graphical value.

To Construct:

Prepare a cost volume graph assuming that the additional billboard advertising cost.

Explanation

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