Question

APPLY THE CONCEPTS: Use the CVP graph to analyze the effects of changes in price and costs Graph the following on your own paper. At the original position, the break-even point in sales dollars is $24,000 at 500 units. The fixed costs are $8,000. Assume the slope of the sales line is equal to the selling price. When the two points of the sales line are at the origin and the break-even point, you see that the slope of the line is $48, which means that the selling price is $_______ . When the two points of the total costs line are at the origin and the break-even point, you see that the slope of the line is $32.00, which means that the variable cost per unit is $_______ . Leave the break-even point (x) at its original position. Use it as a reference point to answer the following questions. Analyze the scenarios by sliding the points on the lines to get the slope desired. Recall that the new break-even point for each scenario exists where the sales and total costs lines intersect. Compare it to the original break-even point (x). (You may want to put the lines back to their original position for each scenario.)

Answer 1

Break even point = Fixed costs / Contribution per unit

500 = 8000/ Contribution per unit

Contribution = 16

Selling price = $48 [ 24000/500]

Variable cost = $ 48- $16 = $32

Any doubt please comment.