Question

Break-Even Sales and Cost-Volume-Profit Graph

For the coming year, Bernardino Company anticipates a unit selling price of $56, a unit variable cost of $28, and fixed costs of $313,600.

Instructions:

1. Compute the anticipated break-even sales in units.
units

2. Compute the sales (units) required to realize operating income of $109,200.
units

3. Construct a cost-volume-profit graph on paper, assuming maximum sales of 22,400 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

$879,200
$784,000
$627,200
$470,400
$375,200

4. Determine the probable operating income (loss) if sales total 17,900 units. If required, use the minus sign to indicate a loss.
$  

Answer 1

Answer :-

1 ) :-

Particulars	Units
Contribution margin per unit	= $56 - $28 = $28
Break-even sales in units	= $313,600 / $28 = 11,200 Units

2 ) :-

Particulars	Units
Desired contribution	= $109,200 + $313,600 = $422,800
Sales units	= $422,800 / $28 = 15,100 Units

3 ) :-

Here we need to find out the Break even value .

Break even = [ 22,400 units / 2 ] * $56

= 11,200 * $56

= $627,200

Break even = $627,200

$879,200	Profit
$784,000	Profit
$627,200	Break-even
$470,400	Loss
$375,200	Loss

• If the amount is above the break even it indicates the Profit .
• If the amount is below the break even it indicates the Loss .

4 ) :-

Particulars	Amount
Total contribution margin earned	= 17,900 units * $28 = $501,200
Net income	= $501,200 - $313,600 = $187,600 [ Profit ]