1) Break-Even Sales BeerBev, Inc., reported the following operating information
ID: 2569653 • Letter: 1
Question
1) Break-Even Sales
BeerBev, Inc., reported the following operating information for a recent year:
In addition, assume that BeerBev sold 51,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $27,500.
a. Compute the break-even sales (barrels) for the current year. Round to the nearest whole barrel.
barrels
b. Compute the anticipated break-even sales (barrels) for the following year. Round to the nearest whole barrel.
barrels
------------------------------------------------------------
2) Break-Even Sales and Sales Mix for a Service Company
Northern Green Airways provides air transportation services between Seattle and San Diego. A single Seattle to San Diego round-trip flight has the following operating statistics:
It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight.
a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 10% business class and 90% economy class seats.
b. How many business class and economy class seats would be sold at the break-even point?
Economy class seats at break-even
-----------------------------------------------------------------------------------------------------------
3) Break-Even Sales Under Present and Proposed Conditions
Management is considering a plant expansion program that will permit an increase of $2,800,000 in yearly sales. The expansion will increase fixed costs by $1,250,000, but will not affect the relationship between sales and variable costs.
Required:
1. Determine the total fixed costs and the total variable costs for 2014.
2. Determine for 2014 (a) the unit variable cost and (b) the unit contribution margin.
3. Compute the break-even sales (units) for 2014.
units
4. Compute the break-even sales (units) under the proposed program.
units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $5,650,000 of income from operations that was earned in 2014.
units
6. Determine the maximum income from operations possible with the expanded plant.
$
7. If the proposal is accepted and sales remain at the 2014 level, what will the income or loss from operations be for 2015?
$ SelectIncomeLossItem 10
8. Based on the data given, would you recommend accepting the proposal?
In favor of the proposal because of the reduction in break-even point.
In favor of the proposal because of the possibility of increasing income from operations.
In favor of the proposal because of the increase in break-even point.
Reject the proposal because if future sales remain at the 2014 level, the income from operations of will increase.
Reject the proposal because the sales necessary to maintain the current income from operations would be below 2014 sales.
Choose the correct answer.
Select abcde Item 11
seats
Net sales $8,976,000 Cost of goods sold $2,244,000 Selling, general and administration 714,000 $2,958,000 Income from operations $ 6,018,000Explanation / Answer
Total variable cost: Element of cost Total Cost Variable portion Variable cost Cost of Goods sold 2244000 75% 1683000 Selling & Admin Expenses 714000 50% 357000 Total Variable cost 2,040,000 Total Fixed cost Element of cost Total Cost Fixed Portion Fixed cost Cost of Goods sold 2244000 25% 561000 Selling & Admin Expenses 714000 50% 357000 Total Fixed cost 918000 Total Variable cost 6373250 Total Fixed cost 3246750 Selling units 51,000 units Selling price per unit (8976,000/51,000) = $ 176 per unit Total Variable cost $ 2040,000 ( for 51,000 units) Variable cost pe runit ( 2040,000/51,000) = $ 40 per unit Contribution margin per unit (Selling price- variable cost per unit) ( 176-40) = $ 136 per unit , Total Fixed cost $ 918,000 Contribution margin per unit $ 136 pe runit ReqA. Break even sales in units = Total Fixed cost / contribution margin per unit (918,000 /136) = 6750 units ReqB. Under, Proposed Year fixed cost will increase by $27,500 Revised fixed cost (918,000+27,500) $ 945,500 Contribution margin per unit $ 136 per unit Revised Break even in units (Revised fixed cost / contribution margin per unit ) ( 945,500/136)= 6952 units
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.