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QUESTION

Calculating Fixed Costs, Variable Costs, and Breakeven

Using the Break-Even Analysis formulas below, solve the following problems. Be sure to show all of your work so you can get partial credit. The questions are shown below for convenience but you can download this Word document containing questionsand write your answers in the spaces provided.

Price x Volume = Fixed Cost + (Variable Cost per Unit x Volume)

  1. Find the breakeven Price if:
  • Volume = 1000
  • Variable Cost per Unit = $5
  • Total Fixed Cost = $2500
  1. Find the breakeven Volume if:
  • Price = $25
  • (Variable Cost per Unit x Volume) = $300
  • Total Fixed Cost = $5000
  1. Find the breakeven Total Fixed Cost if:
  • Price = $30
  • Variable Cost per Unit = $10
  • Volume = 10,000
  1. Find the breakeven Variable Cost per Unit if:
  • Price = $50
  • Fixed Cost = $25,000
  • Volume = 15,000
  1. To help you better understand fixed and variable costs, briefly describe what happens to each of the following as volume increases: (Provide a generalization based on the concept rather than a specific number.)
    1. Total Fixed Cost?
    2. Total Variable Cost?
    3. Fixed Costs per Unit?
    4. Variable Cost per Unit?

Break-Even Volume = Fixed Costs / Contribution Margin per Unit

  1. What is the Contribution Margin per Unit if:
  • Fixed Costs = $2500
  • Revenue per visit = $150
  • Variable Cost per visit = $75
  1. What is the Break-Even Volume from the data above? Should the company provide the services if no other costs are added? Why or why not?

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