P21-63 computing breakeven sales and sales needed to earn a target profit; prefo
ID: 2462788 • Letter: P
Question
P21-63 computing breakeven sales and sales needed to earn a target profit; preforming sensitivity analysisThis problem continues the Daniels Consulting situation from problem P19-40 of chapter 19. Daniels Consulting provides consulting service at an average price of $120 per hour and incurs variable cost of $60 per hour. Assume average fixed cost are $3900 a month.
Requirements 1. What is the number of hours that must be built to reach the break even point? 2. If Daniels desires to make a profit of $4500, how many consulting hours must be completed? 3. Daniels thinks it can reduce fixed costs to $3190 per month, but variable costs will increase to $62 per hour. What is the new break even point in hours? P21-63 computing breakeven sales and sales needed to earn a target profit; preforming sensitivity analysis
This problem continues the Daniels Consulting situation from problem P19-40 of chapter 19. Daniels Consulting provides consulting service at an average price of $120 per hour and incurs variable cost of $60 per hour. Assume average fixed cost are $3900 a month.
Requirements 1. What is the number of hours that must be built to reach the break even point? 2. If Daniels desires to make a profit of $4500, how many consulting hours must be completed? 3. Daniels thinks it can reduce fixed costs to $3190 per month, but variable costs will increase to $62 per hour. What is the new break even point in hours?
This problem continues the Daniels Consulting situation from problem P19-40 of chapter 19. Daniels Consulting provides consulting service at an average price of $120 per hour and incurs variable cost of $60 per hour. Assume average fixed cost are $3900 a month.
Requirements 1. What is the number of hours that must be built to reach the break even point? 2. If Daniels desires to make a profit of $4500, how many consulting hours must be completed? 3. Daniels thinks it can reduce fixed costs to $3190 per month, but variable costs will increase to $62 per hour. What is the new break even point in hours?
Explanation / Answer
(1) break even point = fixed cost/ Contribution per hour = 3900/120-60 =65 hours
(2) 65 hours + 4500/60 = 140 hours
(3) 3190/58 = 55 hours
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