Accurate Accounting provides accounting services at an average price of $110 per

Question

Accurate Accounting provides accounting services at an average price of $110 per hour and incurs variable costs of $60 per hour. Assume average fixed costs are $7,200 a month. (Round your answer to the nearest whole unit.) 1. What is the number of hours that must be billed to reach the breakeven point? 2. If the company desires to make a profit of $3,600, how many hours must be completed? 3. The company thinks it can reduce fixed costs to $6,800, but variable cost will increase to $64 per hour. The price per unit will not change. What is the new breakeven point in hours?

Explanation / Answer

1) Break even hours = 7200/(110-60) = 144 hours

2) Required hours = (7200+3600)/50 = 216 hours

3) New break even point = 6800/(110-64) = 148 Hour

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