Air Purifier Inc. computes its break-even point strictly on the basis of cash ex
ID: 2651099 • Letter: A
Question
Air Purifier Inc. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $2,520,000, but 20 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $54. How many units does the firm need to sell to reach the cash break-even point? (Round your answer to the nearest whole number.)
Cash break-even point
units
The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $47 and has a variable cost of $25. There are $36,960 in fixed costs involved in the production process.
a.
Compute the break-even point in units.
Break-even point
units
b.
Find the sales (in units) needed to earn a profit of $18,480.
Sales quantity needed
units
Boise Timber Co. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $8,300,000, but 20 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $27. How many units does the firm need to sell to reach the cash break-even point?
Cash break-even point
units
Shawn Pen & Pencil Sets Inc. has fixed costs of $421,400. Its product currently sells for $18 per unit and has variable costs of $8.20 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $440,000 and drive up fixed costs to $563,500. Although the price will remain at $18 per unit, the increased automation will reduce costs per unit to $5.75.
a.
Compute the following break-even points. (Do not round intermediate calculations. Round your answers to the nearest whole number.)
Current break-even point
units
Proposed new break-even point
units
b.
As a result of Bic’s suggestion, will the break-even point go up or down?
The break-even point will go down.
The break-even point will go up.
Therapeutic Systems sells its products for $9 per unit. It has the following costs:
Rent
$
125,000
Factory labor
$
2.00
per unit
Executives under contract
$
126,100
Raw material
$
.80
per unit
Separate the expenses between fixed and variable costs per unit. Using this information and the sales price per unit of $9, compute the break-even point. (Do not round intermediate calculations. Round your answer to the nearest whole number.)
Break-even point
units
7)
Calloway Cab Company determines its break-even strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $650,000, but 5 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $6.10. How many units does the firm need to sell to reach the cash break-even point? (Round your answer to the nearest whole number.)
Cash break-even point
units
8)
Eaton Tool Company has fixed costs of $494,400, sells its units for $102, and has variable costs of $54 per unit.
a.
Compute the break-even point. (Round your answer to the nearest whole number.)
Break-even point
units
b.
Ms. Eaton comes up with a new plan to cut fixed costs to $380,000. However, more labor will now be required, which will increase variable costs per unit to $57. The sales price will remain at $102. What is the new break-even point? (Round your answer to the nearest whole number.)
New break-even point
units
c.
Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
Profitability will be less
Profitability will be more
Air Purifier Inc. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $2,520,000, but 20 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $54. How many units does the firm need to sell to reach the cash break-even point? (Round your answer to the nearest whole number.)
Explanation / Answer
Answer:
Cash related fixed costs = Total Fixed Costs - Depreciation
= $2520,000 - 20% ($2520,000)
= $2520,000 - $504000
= $2016,000
Cash BE = $2016000 / $54 = 37333.33units
Answer:(a) Break even points (units)=$36,960/(47-25)
=1680 units
Answer:(b) Desired sales =(36960+18480)/(47-25)
=2520
Answer:
Cash related fixed costs = Total Fixed Costs - Depreciation
= $8300,000 - 20% ($8300,000)
= $8300,000 - $1660000
= $6640000
Cash BE = $6640000 / $27 = 245925.925 units
Answer: (a) Current break even point =421400/9.8=43000 units
Proposed break even point =563500/12.25=46000 units
Answer:(B) The break even point increase.
Answer: break even point=(125000+126100)/(9-2.8)
=40500 units
Answer:7 Cash break even point
Cash related fixed costs = Total Fixed Costs - Depreciation
= $650,000 - 5% ($650,000)
= $650,000 - $32500
= $617500
Cash BE = $617500 / $6.10 = 101229.508units
Answer: 8 (a) break even point =494400/(102-54)
=10300 units
(b) New break-even point=380000/(102-57)
=8444.444
(c) Profitibility will be more.
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