Question 4 The sales manager blives that a reduction in the sales price fo 2.600 wires in orders for 1200 Xe component's why What we the break oven point bel the price is changed? A change in unit sales price affects the Unit CM, 4 New Unit CM = 2,500 -2,000 = $500 -5 36 New BEP units) - 4,000,000/500 = 8,000 units 37 38 Question 5 39 Should the price che cerce). mode? 40 41 Before the price change the BEPunto) was 4,000 units Since the company sold 5,000 units opermed above the break even point and that generated profiles (3) 42 43 the price change is made the BEP(uints) becomes 8.000 and the company wil soll 5,000 1 200 = 6,200 unts So it wil operate below the break even point and will incur a los 45 So the price change should NOT be made. Exercise 7-29 Solution Ready EN D E F G B C Question 1 Compute the break-even point in units. Formula: BEP(units) = Fixed Costs/Unit CM Unit CM = Unit Sales Price - Unit Variable Cost = 3,000 - 2,000 = $1,000 BEP(units) = 4,000,000 / 1,000 = 4,000 units Question 2 What will the new break-even point be if fixed costs increase by 10 percent? If fixed costs increase by 10% they become 4,400,000. (4,000,000 + 10%-4,000,000) New BEP(units) = 4,400,000 /1,000 = 4,400 units Question 3 What was the company's net income for the prior year? Remember that the prior year 5,000 unts were sold Sales Revenue (5,000 units * $3,000 per unit) Variable Expenses (5,000 units * $2,000 per unit) Contribution Margin Fixed Costs Net Income (Profit) 15,000,000 10,000,000 5,000,000 4,000,000 1,000,000 Question 4 The sales manager blives that a reduction in the sales price fo 2.600 wires in orders for 1200 Xe component's why What we the break oven point bel the price is changed? A change in unit sales price affects the Unit CM, 4 New Unit CM = 2,500 -2,000 = $500 -5 36 New BEP units) - 4,000,000/500 = 8,000 units 37 38 Question 5 39 Should the price che cerce). mode? 40 41 Before the price change the BEPunto) was 4,000 units Since the company sold 5,000 units opermed above the break even point and that generated profiles (3) 42 43 the price change is made the BEP(uints) becomes 8.000 and the company wil soll 5,000 1 200 = 6,200 unts So it wil operate below the break even point and will incur a los 45 So the price change should NOT be made. Exercise 7-29 Solution Ready EN D E F G B C Question 1 Compute the break-even point in units. Formula: BEP(units) = Fixed Costs/Unit CM Unit CM = Unit Sales Price - Unit Variable Cost = 3,000 - 2,000 = $1,000 BEP(units) = 4,000,000 / 1,000 = 4,000 units Question 2 What will the new break-even point be if fixed costs increase by 10 percent? If fixed costs increase by 10% they become 4,400,000. (4,000,000 + 10%-4,000,000) New BEP(units) = 4,400,000 /1,000 = 4,400 units Question 3 What was the company's net income for the prior year? Remember that the prior year 5,000 unts were sold Sales Revenue (5,000 units * $3,000 per unit) Variable Expenses (5,000 units * $2,000 per unit) Contribution Margin Fixed Costs Net Income (Profit) 15,000,000 10,000,000 5,000,000 4,000,000 1,000,000
