I - Breakeven Analysis: A bookseller sells each book for $15, fixed costs are $1
ID: 2487220 • Letter: I
Question
I - Breakeven Analysis:
A bookseller sells each book for $15, fixed costs are $15,000 a year, and variable costs are $10 per book.
(a) What is the breakeven point for the book sales?
(b) If 240 books are sold in the first month, approximately how many books would have to be sold in each remaining month to breakeven for the month?
(c) If the bookseller sells 3,721 books the year, how much profit does the bookseller make?
III – Accounting (activities over the month of June): On June 1, 1994, Green Hills Riding Stable, Incorporated, was organized. The following transactions occurred during June: June 1 Shares of Capital stock were issued for $10,000 cash. 4 A horse stable and riding equipment were rented (and paid for) for the month at a cost of $1,200. 8 Horse feed for the month was purchased on credit, $800. 15 Boarding fees of $3,000 for June were charged to those owning horses that were boarded at the stable. (This amount is due on July 10.) 20 Miscellaneous expenses of $600 were paid. 29 Land was purchased from a savings and loan association by borrowing $40,000 on a note from that association. The loan is due to be repaid in five years. Interest payments are due at the end of each month beginning July 31. 30 Salaries of $700 for the month were paid. 30 Riding and lesson fees were billed to customers in the amount of $2,400. (They are due on July 10.) Required:
(a) Prepare a summary of the above transactions. Use columns headed Cash, Accounts Receivable, Land, Accounts Payable, Notes Payable, capital Stock, and Retained earnings. Determine balances after each transaction to show that the basic equation is in balance.
(b) Prepare an income statement for June 1994.
(c) Prepare a balance sheet as of June 30, 1994.
Explanation / Answer
I. a) Breakeven Sales = Fixed Cost / Contribution per unit = 15000/(15-10) = 3000 units, or 3000*15 = $45,000
b) Books to be sold per month to breakeven during last 11 months = (3000-240)/11 = 251 units
c) Statement of Profit from selling 3721 books:
Total profit = $3,605
III. a)
b)
c)
Partculars Amount $ Sales units 3721 Selling Price 15 Less: Variable cost per unit 10 Contribution per unit 5 Total Contribution(3721*5) 18605 Less: Fixed Cost 15000 Profit 3605Related Questions
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