Further analysis of Epstein Manufacturing's fixed costs revealed that the company actually faces annual fixed overhead costs of $9,800 and annual fixed selling and administrative costs of $4,200. Variable cost estimates are correct: direct materials cost, $4.80 per unit; direct labor costs, $6.00 per unit; and variable overlead costs, $1.20 per unit. At this time, the selling price of $40 will not change. Complete the percentage. following formulas for the revised fixed costs. Enter the ratio as a V 28 40 12 Contribution Margin per Unit 70 Contribution Margin 28 Ratio 40 Now complete the formulas for (1) the break-even point in sales dollars and (2) the units sold at the break-even point. To calculate this, divide the break-even point in sales dollars by the unit selling price. 20,000 14,000 Point in Sales Dollars 70 units 500 Units Sold at Break-Even Point one (1). Assume that the number of units that Epstein sold exceeded the break-even point by How much would operating income be? What would operating income be if the units sold exceeded the break-even point by five (5) units? Next Previous Check My Work APPLY THE CONCEPTS: Create the CVP graph for Epstein Manufacturing Review the information and previous calculations for the break-even point in sales dollars for Epstein Manufacturing. Choose the graph that correctly represents the CVP graph for Epstein Manufacturing. Sales Line Total Cost Line Break-even Point a. Units Next Previous Check My Work 44 F6 FS & % Calculator Graph the following on your own paper. At the original position, the break-even point in sales dollars is $24,000 at 500 units. The fixed costs are $8,000. Assume the slope of the sales line is equal to the selling price. When the two points of the sales line are at the origin and the break-even point, you see that the slope of the line is $48, which means that the selling price is 48 costs line are at the origin and the break-even point, you see that the slope of the line is $32.00, which $ When the two points of the total means that the variable cost per unit is Leave the break-even point (x) at its original position. Use it as a reference point to answer the following questions. Analyze the scenarios by sliding the points on the lines to get the slope desired. Recall that the new break-even point for each scenario exists where the sales and total costs lines intersect. Compare it to the original break-even point (x). (You may want to put the lines back to their original position for each scenario.) Each scenario should be considered independently. 1. The company purchases a fixed asset and increases fixed costs by $2,000. Variable costs remain the same, which means that the slope does not change. This will cause the break-even point to move to the right ,which means that break-even point in sales dollars increases provide a product of equal quality at $4.00 per unit less than the current direct materials cost. If the new supplier is , and the break-even point in sales dollars decreases 2. A new supplier can used, the slope of the total costs line will be 3. Market research shows that a price increase will decrease the number of units sold. A price increase will cause the slope of the sales line to increase. But internal analysis shows that this price increase will cause the break-even point in sales to shift to the left which means that fewer units will need to be sold to break even. Feedback Previous Next Check My Work