Question

Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $84, a unit variable cost of $42, and fixed costs of $399,000.

Required:

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

2. Compute the sales (units) required to realize a target profit of $159,600.
units

3. Construct a cost-volume-profit chart, assuming maximum sales of 19,000 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.

$1,117,200
$999,600
$798,000
$596,400
$478,800

4. Determine the probable income (loss) from operations if sales total 15,200 units. If required, use the minus sign to indicate a loss.

Answer 1

		Selling Price	84.00
		Less: Variable Cost	42.00
		Contribution Margin	42.00
		Fixed Costs	399000
	A	BEP in Units:
		Fixed Costs	399000	A
		Contribution Margin PU	42.00	B
		BEP in Units	9500	A/B
	B	Target Profit	159600
		Add :Fixed Costs	399000
		Total Required Contribution	558600	A
		Contribution Margin PU	42.00	B
		Units	13300	A/B
	C		PU	Total
		Selling Price	84.00	1596000	(X19000)
		Less: Variable Cost	42.00	798000
		Contribution Margin	42.00	798000
		Fixed Costs		399000
		NOI		399000
	D		PU	Total
		Selling Price	84.00	1276800	(X15200)
		Less: Variable Cost	42.00	638400
		Contribution Margin	42.00	638400
		Fixed Costs		399000
		NOI		239400