PC-Build, Inc. has the following fixed and variable costs and revenue for the fi
ID: 2716068 • Letter: P
Question
PC-Build, Inc. has the following fixed and variable costs and revenue for the first year of its business. Using the data, draw the breakeven chart and comment on the results from the breakeven analysis:
Fixed Costs Items
Cost ($)
Office
6,000
Inventory
15,000
Advertising
50,000
Wages
80,000
Phone
3,000
Equipment
4,300
Insurance
8,000
Software
9,700
Video
5,500
Printing
4,500
Other
1,700
Total
187,700
The product has revenue of $885 per unit and variable cost of $515/unit.
a. Determine the breakeven quantity per year.
b. Calculate the annual profit if i) 1,500 units are sold and ii) 2,200 units are sold.
Use the following equations and the breakeven chart to answer the questions.
Q Breakeven = [(Fixed Cost)/(Revenue/unit – Variable Cost/unit)
Profit = Total Revenue – Fixed Cost – Total Variable Cost
Fixed Costs Items
Cost ($)
Office
6,000
Inventory
15,000
Advertising
50,000
Wages
80,000
Phone
3,000
Equipment
4,300
Insurance
8,000
Software
9,700
Video
5,500
Printing
4,500
Other
1,700
Total
187,700
Explanation / Answer
a. Breakeven Quantity (BEQ) = Fixed Cost
(Revenue/unit - Variable Cost/unit)
= $187700
($885/unit - $515/unit)
= 507 units
b. Profit = Total Revenue - Fixed Cost - Total Variable Cost
If i) 1500 units are sold -
Profit = ($885 * 1500) - $187700 - ($515 * 1500)
= $1327500 - $187700 - $772500
= $367300
If ii) 2200 units are sold -
Profit = ($885 * 2200) - $187700 - ($515 * 2200)
= $1947000 - $187700 - $1133000
= $626300
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