Question

Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $58, a unit variable cost of $29, and fixed costs of $159,500.

Required:

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

2. Compute the sales (units) required to realize a target profit of $84,100.
units

3. Construct a cost-volume-profit chart, assuming maximum sales of 11,000 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.

$446,600
$400,200
$319,000
$237,800
$191,400

4. Determine the probable income (loss) from operations if sales total 8,800 units. If required, use the minus sign to indicate a loss.
$

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Answer 1

1.Break-even Sales Units = Fixed Costs/Contribution per unit

Contribution per Unit = Selling Price – Variable Cost

=58-29 = $29

Break Even Sales = 159500/29 = 5500 units

2. Target Profit = 84100

Add: Fixed Cost = 159500

Desired Contribution 243,600

Contribution per Unit = 29

No. Of units = 8,400

3.

Sales (in Dollars)	Sales(in Units)	Situation
$446,600	7700	Profit
$400,200	6900	Profit
$319,000	5500	Break-Even
$237,800	4100	Loss
$191,400	3300	Loss

4.Sales = 8800 units

Contribution = 8800*29 = 255,200

Less: Fixed Costs $159,500

Profit $95,700