Show work: Voellers Upholstery Co. Produces inexpensive leather chairs. The aver

Question

Show work: Voellers Upholstery Co. Produces inexpensive leather chairs. The average selling price for one of the chairs is $400. The variable cost per chair is $250. Voeller's has average fixed costs per year of $450,000. A) what is the break-even point in units? B) what is the break-even point in dollar sales? C) what would be the operating profit or loss associated with the production and sale of (1) 3,000 chairs or (2) 4,000 chairs? Show work: Voellers Upholstery Co. Produces inexpensive leather chairs. The average selling price for one of the chairs is $400. The variable cost per chair is $250. Voeller's has average fixed costs per year of $450,000. A) what is the break-even point in units? B) what is the break-even point in dollar sales? C) what would be the operating profit or loss associated with the production and sale of (1) 3,000 chairs or (2) 4,000 chairs? Show work: A) what is the break-even point in units? B) what is the break-even point in dollar sales? C) what would be the operating profit or loss associated with the production and sale of (1) 3,000 chairs or (2) 4,000 chairs?

Explanation / Answer

Solution:

Sales 400 Less: Variable cost 250 Contribution margin 150 P/V Ratio = Contribution / sales * 100 P/V Ratio =   37.50% Break even point ( in dollars ) = Fixed cost / Pv ratio Break even point = 1,200,000 Fixed cost = 450,000 Break even point ( in units ) = Fixed cost / Contribution margin Break even point =                         3,000 Fixed cost = 450,000 3,000 chairs Sales 1,200,000 Less: Variable cost 750,000 Contribution margin 450,000 Less: Fixed cost 450,000 Net income 0 4,000 chairs Sales 1,600,000 Less: Variable cost 1,000,000 Contribution margin 600,000 Less: Fixed cost 450,000 Net income 150,000

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