Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Break-Even Sales and Cost-Volume-Profit Chart Last year Hever Inc. had sales of $500,000, based on a unit selling price of $250. The variable cost per

Break-Even Sales and Cost-Volume-Profit Chart

Last year Hever Inc. had sales of $500,000, based on a unit selling price of $250. The variable cost per unit was $175, and fixed costs were $75,000. The maximum sales within Hever Inc.'s relevant range are 2,500 units. Hever Inc. is considering a proposal to spend an additional $33,750 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.

Required:

1.Construct a cost-volume-profit chart on your own paper, indicating the break-even sales for last year.

Break-even sales (dollars)

Break-even sales (units)

2.Using the cost-volume-profit chart prepared in part (1), determine (a) the income from operations for last year and (b) the maximum income from operations that could have been realized during the year.

Income from operations

Maximum income from operations

3.Construct a cost-volume-profit chart (on your own paper) indicating the break-even sales for the current year, assuming that a noncancellable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs.

Dollars

Units

4.Using the cost-volume-profit chart prepared in part (3), determine (a) the income from operations if sales total 2,000 units and (b) the maximum income from operations that could be realized during the year.

Income from operations at 2,000 units

Maximum income from operations

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Excel Applications For Accounting Principles

Authors: Gaylord SmithBruce Walz

4th Edition

1133388027, 9781133388029

More Books

Students also viewed these Accounting questions

Question

3. How much information do we need to collect?

Answered: 1 week ago

Question

2. What types of information are we collecting?

Answered: 1 week ago

Question

5. How quickly can we manage to collect the information?

Answered: 1 week ago