Question
In: Accounting
1) The fixed costs at Harley Motors are $1 million annually. The main product has revenue...
1) The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $8.50 per unit and $4.25 variable cost. Determine the following:
(a) Breakeven quantity per year.
(b) Annual profit if 200,000 units are sold and if 350,000 units are sold.
Solutions
Expert Solution
| (PER UNIT) | ||||
| SELLING PRICE | 8.5 | |||
| LESS | VARIABLE COST | 4.25 | ||
| CONTRIBUTION | 4.25 | |||
| A) | BREAK EVEN QUANTITY | FIXED COST / CONTRIBUTION PER UNIT | ||
| 1000000 / 4.25 | ||||
| 235294.1 UNITS | ||||
| B) | ANNUAL PROFIT IF 200,000 UNITS ARE SOLD | |||
| CONTRIBUTION (UNITS* CONTRIBUTION PER UNIT) | 850000 | 200000 * 4.25 | ||
| LESS | FIXED COST | 1000000 | ||
| PROFIT / (LOSS) | (1,50,000) | |||
| ANNUAL PROFIT IF 350,000 UNITS ARE SOLD | ||||
| CONTRIBUTION (UNITS* CONTRIBUTION PER UNIT) | 1487500 | 350000 * 4.25 | ||
| FIXED COST | 1000000 | |||
| PROFIT / (LOSS) | 4,87,500 | |||
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