1 The president wanted to know the break-even point for each of the company\'s p
ID: 2334555 • Letter: 1
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1 The president wanted to know the break-even point for each of the company's products, but I am having trouble figuring them out. T'm sure you can handle it, Cheryl. And, by the way. I need your analysis on my desk tomorow morning at 8:00 sharp in time for the follow-up meeting at 9:00. Piedmont Fasteners Corporation makes three different clothing fasteners In its manufacturing facility in North Carolina. Data concerning these products appear below points Annual sales volune Unit selling price Variable expense per unit 2.18 1.88 $ 1.ee $ 1.2e $ 1.88 Total fixed expenses are $272,000 per year numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories. . What is the company's over-all break-even point in dollar sales? 2 Of the total fixed expenses of $272.000. $27,830 could be avoided if the Velcro product is dropped, $97,800 if the Metal product is dropped, and $58,800 if the Nylon product is dropped. The remaining fixed expenses of $87.570 consist of common fixed expenses such as a. What is the break even point in unit sales for each product? b. If the company sells exactly the break even quantity of each product, what will be the overall profit of the company? ative salaries and rent on the factory building that could be avoided only by going out of business entirely Prev 1 of 1 Next O type here to searchExplanation / Answer
1. Break even point in dollar sales
Break even point is a point at which there is no profit or loss.
Bresk Even Point (Dollar Sales) = Total Fixed Expense/Contribution Margin Ratio
Total Sales = (109000*2.1) + (194000*1.8) + (305000*1.3)
= 974600
Total Variable Expense = (109000*1) + (194000*1.2) + (305000*1)
= 646800
Total Contribution = Total Sales - Total Variable Expense
= 327800
Contribution Ratio = Total Contribution/Total Sales * 100
= 327800/974600 * 100
= 33.63%
BEP (Dollar Sales) = 272000/33.63%
= $808,801.67 (approx.)
2)
a. BEP for Velcro.
Its fixed expense is $27,830
Contribution per unit = Unit Selling Price - Variable Expense per unit
= 2.1 - 1
= 1.1 per unit
BEP (Units) = Fixed Expense/Contribtion per unit
= 27830/1.1
= 25300 units
BEP for Metal
Its fixed expense is $97,800
Contribution per unit = Unit Selling Price - Variable Expense per unit
= 1.80 - 1.20
= 0.60 per unit
BEP (Units) = Fixed Expense/Contribtion per unit
= 97800/0.6
= 163,000 units
BEP for Nylon
Its fixed expense is $58,800
Contribution per unit = Unit Selling Price - Variable Expense per unit
= 1.30 - 1.00
= 0.30 per unit
BEP (Units) = Fixed Expense/Contribtion per unit
= 58800/0.3
= 196,000 units
b. If the company sells excatly the break even quantity of each product,
Total Contribution = (25300*1.1) + (163000*0.6) + (196000*0.3)
= 184,430
Profit = Total Contribution - Total Fixed Expense
= 184,430 - 272,000
= (87,570)
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