Cost- Volume- Profit- Analysis and Break-Even

1. A firm manufactures a product that sells for $1515 per unit. Variable cost per unit is $5 and fixed cost per period is $1500. Capacity per period is 1200 units.

(a) Develop an algebraic statement for the revenue function and the cost function.

(b) Determine the number of units required to be sold to break even.

(c) Compute the break-even point as a percent of capacity.

(d) Compute the break-even point in sales dollars.

2. A firm manufactures a product that sells for $1212 per unit. Variable cost per unit is $77 and fixed cost per period is $1900. Capacity per period is 700units. Perform a break-even analysis showing a detailed break-even chart.

Find the revenue function, TR.

TR equals = ________ (use x as the variable. Do not include the $ symbol in your answer.)

3. The neighbourhood bookstore sells novels for $13 per unit. The cost to purchase one book is $7. The store has fixed costs per month of $1800. The store estimates that they can sell 800 books each month.

(a) Compute the break-even point in units (books).

(b) Compute the break-even point in sales dollars.

(c) Compute the break-even point as a percent of capacity.

4. Sebastian and a group of friends have set up a weekend baseball tournament. The tournament will be held on Saturday and Sunday. They can rent a baseball field for a daily charge of $109and equipment for $83

per day. If they hire an independent umpire, they would need to pay $148 for the day. They would arrange to have caps made for each player at a cost of $7 each. If Sebastian can get 85 people to participate in the tournament, what price should be charged for admission to recover costs?

The price for admission to the tournament should be $___.

(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

5. Melinda and Morris sell soft drinks at ball games. They charge $1.75 for each bottle. The cost to purchase each bottle of soft drink is $0.60. They estimate that they can sell at least 213 bottles at each game. To break even, what is the most that they can pay in fixed costs?

The most that can be paid for fixed costs is $___ . (round to the nearest cent)

6. To pay for his academic fees, Tarek, a college student, is selling a computer accessory to other students. His cost to purchase each piece is $76, and he is planning to sell the accessories for $110 each. Fixed costs for advertising amount to

$380.

(a) Compute the contribution margin per unit.

(b) Compute the contribution rate.

(c) Compute the break-even point in units.

(d) Compute the break-even point in sales dollars.

7. The data to the right pertain to the operating budget of a manufacturing company. Compute the following. (a) contribution margin $____ (b) contribution rate (c) break-even point in sales dollars

Sales Fixed Costs Total Variable Costs Total Cost Net Income

$255,000 $1,517400

$2,810,000 $1,772,400 $1,037,600

8. Tina, an entrepreneurial business student, wants to set up a business completing tax forms for other students. Her price would be 48.00 for each job. Fixed expenses include $304.00 for the tax software which Tina would purchase. Tina would hire some accounting students to complete the forms, paying them for two hours at $12 per hour for each job. She would also have paper and supplies costs of $55 per job. How many jobs would she have to generate before she starts to make a profit? Make the assumption that it takes an accounting student two hours to complete one tax return.

Tina would have to generate ___ taxreturns before she starts to make a profit.

9. Ingrid is planning to expand her business by taking on a new product that costs $8.89. In order to market this new product, $964.00 must be spent on advertising. The suggested retail price for the product is $13.24.

Answer each of the following independent questions.

(a) If a price of $15.86 is chosen, the number of units she needs to sell to break even is _____ .

(b) If advertising is increased to $1155.00, and the price is kept at $13.24, how many units does she need to sell to break even?

10. Projected financial results for the university's cafeteria for next year are shown. Answer each of the following independent questions. (a) How much is the contribution margin and the contribution rate? (b) How much does the business need to sell to break even? (c) If the business was to spend $24,000 to upgrade their processes, how much does the business need to sell to break even? (d) If 33% more meals were sold, what would be the resulting net income?

Sales Fixed-Costs Total-Variable-Costs Total Cost Net Income

$583,000 $237,480

$872,000 $820,480 $51,520