   Chapter 21, Problem 21.3APR

Chapter
Section
Textbook Problem

Break-even sales and cost-volume-profit chartFor the coming year, Cleves Company anticipates a unit selling price of $100, a unit variable cost of$60, and fixed costs of $180,000.Instructions1. Compute the anticipated break-even sales (units).2. Compute the sales (units) required to realize a target profit of$240,000.3. Construct a cost-volume-profit chart, assuming maximum sales of 20,000 units within tile relevant range.4. Determine the probable income (loss) from operations if sales total 16,000 units.

1.

To determine

Break-even Point: It refers to a point in 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 point, 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 anticipated break-even sales (units).

Explanation

Compute the anticipated break-even sales (units).

Fixed cost =$480,000 Contribution margin per unit =$40 per unit (1)

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit=$480,000$40perunit=12,000units

Working note:

Determine the contribution margin per unit

2.

To determine
the amount of sales (units) if the company desires a target profit of \$240,000.

3.

To determine

To construct: a cost-volume-profit chart assuming the sales of 20,000 units within the relevant range.

4.

To determine
the probable income (loss) from operations if sales total 16,000 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

Is an initial public offering an example of a primary or a secondary market transaction? Explain.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

Identify and briefly compare the two leading stock exchanges in the United States today.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

What does the invisible hand of the marketplace do?

Brief Principles of Macroeconomics (MindTap Course List)

List and describe the three functions of money.

Principles of Macroeconomics (MindTap Course List)

FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under differen...

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