Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $62, a unit variable cost of $31, and fixed costs of $282,100.

Required:

1. Compute the anticipated break-even sales in units. units

2. Compute the sales (units) required to realize income from operations of $139,500. units

3. Construct a cost-volume-profit chart, assuming maximum sales of 18,200 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

$787,400
$706,800
$564,200
$421,600
$341,000	Loss

4. Determine the probable income (loss) from operations if sales total 14,600 units. If required, use the minus sign to indicate a loss. $ Income

Feedback

1. Unit sales minus unit variable costs equals unit contribution margin.

Fixed costs divided by unit contribution margin equals break-even point.

2. (Fixed costs + Target profit) divided by unit contribution margin equals sales units.

3. Draw lines for total costs and total sales. The two lines should intersect at the break-even point.

4. (Sales units x unit contribution margin) minus fixed costs equals income (loss) from operations.

Learning Objective 3, Learning Objective 4.