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Break-even sales and cost-volume-profit chart For the coming year, Cleves Company anticipates a unit selling price of $100, a unit variable cost of $60, and fixed costs of $180,000. Instructions 1. 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.

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 21.3APR
Textbook Problem

Break-even sales and cost-volume-profit chart

For the coming year, Cleves Company anticipates a unit selling price of $100, a unit variable cost of $60, and fixed costs of $180,000.

Instructions

1. 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.

Expert Solution

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 of Solution

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

Expert Solution

2.

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

Expert Solution

3.

To determine

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

Expert Solution

4.

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

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Chapter 21 Solutions

Accounting
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