Question

Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $96, a unit variable cost of $48, and fixed costs of $465,600.

Required:

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

2. Compute the sales (units) required to realize income from operations of $182,400.
units

3. Construct a cost-volume-profit chart, assuming maximum sales of 19,400 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.

$1,305,600
$1,161,600
$931,200
$700,800
$556,800

4. Determine the probable income (loss) from operations if sales total 15,500 units. If required, use the minus sign to indicate a loss.
$  

Answer 1

1) Break even unit = Fixed cost/Contribution margin per unit = 465600/(96-48) = 9700 Units

2) Desired unit = (465600+182400)/48 = 13500 Units

3) Calculate following

1305600	Profit
1161600	Profit
931200	Break even
700800	Loss
556800	Loss

4) Net operating income = (15500*48-465600) = 278400