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Scenario A Compute the break-even point in sales dollars if fixed costs are $200,000 and the total contribution margin is 20% of revenue. Show the...
Scenario A
Compute the break-even point in sales dollars if fixed costs are $200,000 and the total contribution margin is 20% of revenue.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario B
Danny Company makes and sells stuffed animals. One product, Panda Bear, sells for $28 per bear. Panda Bears incur fixed costs of $100,000 per month and a variable cost of $12 per bear. How many Panda Bears must be produced and sold each month to break even?
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario C
Jerry is considering buying a company if it will break even or earn net income on revenues of $80,000 per month. The company that Jerry is considering sells each unit it produces for $5. Use the following cost data to compute the variable cost per unit and the fixed cost for the period. Calculate the break-even point in sales dollars. Should Jerry purchase this company?
Volume (units)
Total Cost
8,000
$70,000
68,000
$190,000
HINT: Total costs include both variable and fixed portion, so it is necessary to break down total costs into variable and fixed before computing break-even.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario D
ReliableDelivery currently delivers packages for $9 each. The variable cost is $3 per package, and fixed costs are $60,000 per month. Compute the break-even point in both sales dollars and units under each of the following independent assumptions. Comment on why the break-even points are different.
- The costs and selling price are as just given.
- Fixed costs are increased to $75,000.
- Selling price is increased by 10%. (Fixed costs are $60,000.)
- Variable cost is increased to $4.50 per unit. (Fixed costs are $60,000 and selling price is $9.)
- Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
