Question

In: Accounting

For the coming year, Cleves Company anticipates a unit selling price of $138, a unit variable cost of $69, and fixed costs of $800,400.

Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $138, a unit variable cost of $69, and fixed costs of $800,400.

Required:

1. Compute the anticipated break-even sales (units).
units

2. Compute the sales (units) required to realize a target profit of $386,400.
units

3. Construct a cost-volume-profit chart, assuming maximum sales of 23,200 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.

$2,235,600
$2,001,000
$1,600,800
$1,200,600
$966,000

4. Determine the probable income (loss) from operations if sales total 18,600 units. If required, use the minus sign to indicate a loss.

Solutions

Expert Solution

1) brrak even units = FC/contribution oer unit

= 800400/(138-69)

= 11600 units

2) 17200

Contribution = fixed cost + profit = 800400 + 386400 = 1186800

Sales unit = 1186800/69 = 17200

3) PV RATION = 50%

At $2235600

Sales 2235600
Variable cost 1117800
Contribution 1117800
Fixed cost 800400
Profit 317400

At $2001000

Sales 2001000
V.C. 1000500
Contribution 1000500
Fixed cost 800400
Profit 200100

At $1600800

Sales 1600800
V.C. 800400
CONTRIBUTION 800400
FIXED COST 800400
PROFIT 0

AT $1200600

Sales 1200600
V.C. 600300
CONTRIBUTION 600300
FIXED COST 800400
PROFIT (200100)

At $966000

Sales 966000
V.C. 483000
CONTRIBUTION 483000
FIXED COST 800400
PROFIT (317400)

4) at sale of 18600 units

Sales 2566800
V.C. 1283400
CONTRIBUTION 1283400
FIXED COST 800400
PROFIT 483000

For any query please comment and

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