 # Break-even sales and cost-volume-profit chart For the coming year, Culpeper Products Inc. anticipates a unit selling price of $50, a unit variable cost of$110, and fixed costs of $800,000. Instructions 1. Compute the anticipated break-even sales (units). 2. Compute the sales (units) required to realize income from operations of$300,000. 3. Construct a cost-volume-profit chart, assuming maximum sales of 40,000 units within the relevant range. 4. Determine the probable income (loss) from operations if sales total 32,000 units. ### Accounting

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

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

#### Solutions

Chapter
Section
Chapter 21, Problem 21.3BPR
Textbook Problem

## Break-even sales and cost-volume-profit chartFor the coming year, Culpeper Products Inc. anticipates a unit selling price of $50, a unit variable cost of$110, and fixed costs of $800,000.Instructions1. Compute the anticipated break-even sales (units).2. Compute the sales (units) required to realize income from operations of$300,000.3. Construct a cost-volume-profit chart, assuming maximum sales of 40,000 units within the relevant range.4. Determine the probable income (loss) from operations if sales total 32,000 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 =$800,000 Contribution margin per unit =$40 per unit (1)

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit=$800,000$40perunit=20,000units

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 \$300,000.

Expert Solution

3.

To determine

To construct: a cost-volume-profit chart assuming the sales of 40,000 units within the relevant range.

Expert Solution

4.

To determine
the probable income (loss) from operations if sales total 32,000 units.

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