6. Based on the data contained in Table A, what is the break-even point in sales
ID: 2667674 • Letter: 6
Question
6. Based on the data contained in Table A, what is the break-even point in sales dollars?TABLE A
Average selling price per unit $18.00
Variable cost per unit $13.00
Units sold 400,000
Fixed costs $650,000
Interest expense $ 50,000 (Points : 1)
$2,340,000
$1,850,000
$1,775,500
$700,000
7. The final approval of a dividend payment comes from (Points : 1)
the controller.
the president of the company.
the board of directors.
It is a joint decision requiring approval from all of the above.
8. Moline Manufacturing Corporation reported the following items: Sales = $6,000,000; Variable Costs of Production = $1,500,000; Variable Selling and Administrative Expenses = $550,000; Fixed Costs = $1,350,000; EBIT = $2,600,000; and the Marginal Tax Rate =35%. Moline's break-even point in sales dollars is (Points : 1)
$2,050,633.
$2,197,500.
$2,438,750.
$2,785,000.
9. Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Each pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. What is the break-even point in sales dollars? (Points : 1)
$3,100,000
$2,875,000
$1,705,000
$1,625,000
10. Bob's Baked Goods Company reported the following income statement for 2009:
Sales $2,500,000
Variable Costs 900,000
Fixed Operating Costs 700,000
EBIT 900,000
Interest Expense 200,000
EBT 700,000
Taxes (30%) 210,000
Net Income $490,000
Earnings Per Share $4.90
If Bob's sales next year increase by 20%, Bob's EBIT will increase: (Points : 1)
20%, showing no operating leverage.
20%, showing no financial leverage.
over 35%, due to operating leverage.
over 35%, due to operating leverage and financial leverage.
Explanation / Answer
6) Break-even point in sales dollars: Average selling price per unit $18.00Variable cost per unit $13.00
Units sold 400,000
Fixed costs $650,000
Interest expense $50,000 Total fixed costs = $650,000 Break-even point in sales dollars = Fixed costs / Contribution margin ratio But contribution margin ratio = Contribution margin per unit / Selling price per unit = (Selling price per unit - Variable cost per unit) / SP per unit = ($18 - $13) / $18 = 0.27778 or 27.778% Break-even point in sales dollars = $650,000 / 0.277778 = $2,340,000 Therefore, the beak-even sales in dollars is $2,340,000 7) Board of Directors (c) 8) Sales = $6,000,000; Variable Costs of Production = $1,500,000; Variable Selling and Administrative Expenses = $550,000; Fixed Costs = $1,350,000; EBIT = $2,600,000; and the Marginal Tax Rate =35%. Moline's break-even point in sales dollars is Break-even point in sales dollars = Fixed costs / Contribution margin ratio Total variable costs = $1,500,000 + $550,000 = $2,050,000 But contribution margin ratio = Contribution margin per unit / Selling price per unit = (Sales - Variable cost) / SAles = ($6,000,000 - $2,050,000) / $6,000,000 = 0.6583 or 65.83% Break-even point in sales dollars = $1,350,000 / 0.658333 = $2,050,633 Therefore, the beak-even sales in dollars is $2,050,633 9) Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Each pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. What is the break-even point in sales dollars? Contribution margin per unit = Selling price per unit - Variable cost per unit = $15.5 - $7.5 = $8 Contribution margin ratio = CM per unit / Selling price per unit = $8 / $15.5 = 0.51613 Break-even sales in dollars = Fixed costs / CM ratio = $880,000 / 0.516129 = $1,705,000 Therefore, the break-even sales in dollars is $1,705,000 10) If sales increase by 20% next year, then EBIT will increase by Sales --------------------$3,000,000 (-) Variable costs---------$1,080,000 ------------------------------------------- Cotribution margin-------$1,920,000 (-) Fixed operating costs- $700,000 ------------------------------------------ EBIT----------------------$1,220,000 Therefore, the EBIT will increase by $1,220,000 - $900,000 = $320,000 Percentage increase = $320,000 / $900,000 = 35.56% Therefore, the correct option is 35% over, due to operating leverage. Contribution margin per unit = Selling price per unit - Variable cost per unit = $15.5 - $7.5 = $8 Contribution margin ratio = CM per unit / Selling price per unit = $8 / $15.5 = 0.51613 Break-even sales in dollars = Fixed costs / CM ratio = $880,000 / 0.516129 = $1,705,000 Therefore, the break-even sales in dollars is $1,705,000 10) If sales increase by 20% next year, then EBIT will increase by Sales --------------------$3,000,000 (-) Variable costs---------$1,080,000 ------------------------------------------- Cotribution margin-------$1,920,000 (-) Fixed operating costs- $700,000 ------------------------------------------ EBIT----------------------$1,220,000 Therefore, the EBIT will increase by $1,220,000 - $900,000 = $320,000 Percentage increase = $320,000 / $900,000 = 35.56% Therefore, the correct option is 35% over, due to operating leverage.
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.