eBook

Question Content Area

Profit-Volume Chart

For the coming year, Loudermilk Inc. anticipates fixed costs of $600,000, a unit variable cost of $75, and a unit selling price of $125. The maximum sales within the relevant range are $2,500,000.

a. Determine the maximum possible operating loss. $fill in the blank 1

b. Compute the maximum possible operating profit. $fill in the blank 2

c. Construct a profit-volume chart on paper. Indicate whether each of the following levels of sales is in the operating profit area, operating loss area, or at the break-even point

4,800 units	Break-even pointOperating loss areaOperating profit area
8,000 units	Break-even pointOperating loss areaOperating profit area
12,000 units	Break-even pointOperating loss areaOperating profit area
16,000 units	Break-even pointOperating loss areaOperating profit area
20,000 units	Break-even pointOperating loss areaOperating profit area

d. Estimate the break-even sales (units) by using the profit-volume chart constructed in part (c).

4,8008,00012,00016,00020,000

units