BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 21, Problem 21.14EX
Textbook Problem

Break-even analysis

The Junior League of Yadkinville, California, collected recipes from members and published a cookbook entitled Food for Everyone. The book will sell for $18 per copy. The chairwoman of the cookbook development committee estimated that the club needed to sell 2,000 books to break even on its $4,000 investment. What is the variable cost per unit assumed in the Junior League's analysis?

Expert Solution
To determine

Break-even Analysis: It refers to an analysis of the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit

To compute: the variable cost per unit.

Explanation of Solution

Compute the variable cost per unit.

Fixed cost =$4,000

Selling price per unit =$18

Break-even sales (units) =2,000 units

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit2,000units=$4,000(Sellingpriceperunit)

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Chapter 21 Solutions

Accounting
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