Assumptions: Sales price per ticket = $1,572 Variable cost per unit = $786 (cost
ID: 2419203 • Letter: A
Question
Assumptions:
Sales price per ticket = $1,572
Variable cost per unit = $786 (cost of goods sold of $707 + Sales commissions of $79)
Calculate the breakeven point in units for 2006 and record in the table below.
2003
2004
2006
BEP in units
3,611.11
4,191.25
rounded to whole units
3,612
4,192
Why are the amounts rounded to whole units?
Complete the table below using the financial information provided in Exhibit 1and the information in the table above. Analyze selling price per unit, variable cost per unit, and total fixed cost information, as well as operating statistics, to explain the cause of change.
Years
Change in BEPt in units
Direction of change
Cause of change
2003 - 2004
2004 - 2006
Reflection: How does your individual answer for this question differ from the information you just completed?
Alternative 1: Decrease average sales ticket price by 10% and increase number of sales tickets (unit sales) to 7,500 sales tickets.
For each question, answer yes or no for each piece of information listed.
Information
For this alternative only, is there a change in this item that affects calculation of net income? Yes or No
For this alternative only, is there a change in this item that effects the calculation of the new breakeven point? Yes or No
Selling price per unit
Variable cost per unit
Total fixed costs
Net income
Sales volume
2003
2004
2006
BEP in units
3,611.11
4,191.25
rounded to whole units
3,612
4,192
Explanation / Answer
Break even point in units = Fixed cost/Contribution per unit
Contribution per unit = Selling price per unit - Variable cost per unit
2003:
Fixed cost = Break even point in units * Contribution per unit
= 3,611.11 * ($1,572 - $786)
= 2,838,332.46
2004:
Fixed cost = Break even point in units * Contribution per unit
=4,191.25 * ($1,572 - $786)
=3,294,322.5
Change in fixed cost in percentage = (3,294,322.5 - 2838,322.5)/2,838,322.5
= 16.066%
fixed cost for 2006 will be 3,294322.5 * (100 +16.066*2)
= 435,021,156.7
Assumed percentage of change in fixed cost is constant for next 2 years.
Break even points = 435,021,156.7/786 = 553,462 units
As fixed cost changed constantly, break even point changed to high.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.