Break-Even Calculations.

A company's budget shows sales of 300,000 units and revenues of $2,400,000. Variable costs are $1,200,000 and fixed costs are $900,000.

Required:

a. 1. What is the break-even point in units and dollars?

2. What is the contribution margin percentage?

3. Calculate the margin of safety.

4. Construct a break-even chart and a profit-volume chart for the above data.

b. Assuming a 10 percent increase in sales prices and variable costs, recalculate, (1), (2),and

(3) above.

c. Assuming a desired profit after tax (50% rate) of $100,000, what level of sales must be achieved to reach the $100,000 profit after tax?

d. Assuming a 10 percent reduction in variable costs and a 10 percent increase in fixed cost, recalculate (1), (2), and (3) above.

Approximating Cost-Volume-Profit Relationships.

A company does not have standard costs or budgets. For the past five years, sales and costs, respectively, were $46,000 and $37,000; $40,000 and $34,500; $54,000 and $40,000; $50,000 and $38,000; and $48,000 and $37,000. Projected sales and costs for the current year are

$56,000 and $44, 000. Fixed costs have been averaging $20,000 per year.

Required:

Analyze the company's projected operations for the current year and determine if the costvolume-

profit relationships of prior years are being maintained.