Question

 JWG Company publishes Creative

Crosswords.

Last​ year, the book of puzzles sold for

$ 9.23$9.23

with variable operating cost per book of

$ 7.22$7.22

and fixed operating costs of

$ 42 comma 000$42,000.

a. How many books must JWG sell this year to achieve the breakeven point for the stated operating​ costs, if all figures remain the same as for last​ year?

b. How many books must JWG sell this year to achieve the breakeven point for the stated operating​ costs, if fixed operating costs increase to

$ 46 comma 000$46,000

and all other figures remain the​ same?

c. How many books must JWG sell this year to achieve the breakeven point for the stated operating​ costs, if the selling price increases to

$ 9.96$9.96

and all costs remain the same as for last​ year?

d. How many books must JWG sell this year to achieve the breakeven point for the stated operating​ costs, if the variable operating cost per book increases to

$ 7.95$7.95

and all other figures remain the​ same?

e. What conclusions about the operating breakeven point can be drawn from your​ answers?

Answer 1

(a) Calculation of Breakeven point

First we calculate the contribution per unit

Contribution per unit= Selling price per unit - Variable cost per unit = $9.23 - $7.22 = $2.01

Breakeven Point = Fixed Cost / Contribution per unit = $42,000 / $2.01 = 20,895.52 or say 20,896 books

Breakeven sales of book is 20,896

(b) Calculation of Breakeven point if fixed cost increase

First we calculate the contribution per unit

Contribution per unit= Selling price per unit - Variable cost per unit = $9.23 - $7.22 = $2.01

Breakeven Point = Fixed Cost / Contribution per unit = $46,000 / $2.01 = 22,885.57 or say 22,886 books

Breakeven sales of book is 22,886

(c) Calculation of Breakeven point if sales price increase

First we calculate the contribution per unit

Contribution per unit= Selling price per unit - Variable cost per unit = $9.96 - $7.22 = $2.74

Breakeven Point = Fixed Cost / Contribution per unit = $42,000 / $2.74 = 15,328.47 or say 15,329 books

Breakeven sales of book is 15,329

(d)

Calculation of Breakeven point if variable cost increase

First we calculate the contribution per unit

Contribution per unit= Selling price per unit - Variable cost per unit = $9.23 - $7.95 = $1.28

Breakeven Point = Fixed Cost / Contribution per unit = $42,000 / $1.28 = 35,812.50 or say 35,813 books

Breakeven sales of book is 38,813

(e) From the above calculation we conclude that effect of the variable cost is much higher in the breakeven point of the company so company require to more focus on variable cost of the company and then after focus on sales price it will also affect the company's breakeven point after the variable cost and increase in fixed operating cost less affect the breakeven cost compare to selling price and variable cost.