Breakeven point long dash— Changing costs/revenues JWG Company publishes Creativ
ID: 2799053 • Letter: B
Question
Breakeven
pointlong dash—Changing
costs/revenuesJWG Company publishes Creative
Crosswords.
Last year the book of puzzles sold for
$10.11
with variable operating cost per book of
$7.40
and fixed operating costs of
$39,000.
a. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs, if all figures remain the same as for last year?
b. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs, if fixed operating costs increase to
$43,000
and all other figures remain the same?
c. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs, if the selling price increases to
$ 10.70
and all costs remain the same as for last year?
d. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs, if the variable operating cost per book increases to
$ 7.99
and all other figures remain the same?
e. What conclusions about the operating breakeven point can be drawn from your answers?
Explanation / Answer
a.
Fixed cost= $39,000
Price = $10.11
Variable cost = $7.40
Break even point = $39,000 / ($10.11 - $7.40)
= $39,000 / $2.71
= 14,391 unit
Operating Break even point is 14,391 unit.
b.
Fixed cost= $43,000
Price = $10.11
Variable cost = $7.40
Break even point = $43,000 / ($10.11 - $7.40)
= $39,000 / $2.71
= 15,867 unit
Operating Break even point is 15,867 unit.
c.
Fixed cost= $39,000
Price = $10.70
Variable cost = $7.40
Break even point = $39,000 / ($10.70 - $7.40)
= $39,000 / $3.30
= 11,818 unit
Operating Break even point is 11,818 unit.
d.
Fixed cost= $39,000
Price = $10.11
Variable cost = $7.99
Break even point = $39,000 / ($10.11 - $7.99)
= $39,000 / $2.12
= 14,391 unit
Operating Break even point is 18,396 unit.
e.
When fixed cost and variable cost increase and price remains constant then it take more unit to produce to reach break even. when price increase and fixed cost and variable cost remains constant then it take less unit to produce to reach breakeven.
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