Problem 1

The following is a summary of data from the companys operation for the year:
Selling price per unit: $95
Fixed Expenses:
Overhead
$195,000
Advertising
55,000
Administrative expense
68,000
Total Fixed Expenses
$318,000
Direct Materials
Direct Labor
Overhead
Selling Expense
Variable costs per unit

$23
8
6
5
$42

Required:
1. Compute the breakeven point in units for the year
2. If the company sold 6,500 units this year. How much profit did it produce?
Problem 2
A company currently breaks even by selling 50,000 at $28 each with a variable cost
per unit of $20. The company decides to move to a new factory where the variable
cost per unit will decrease by $2 and fixed expenses will decrease by $50,000?
What is the new break even sales and units?
Problem 3
Suppose that a company has a product that sells for $50 in a competitive market.
The owner requires a net income (after tax) of $100,000. The capacity of the plant
is 100,000 units. If the company operates at capacity what does the variable cost
per unit have to be in order for the company to break even assuming that fixed
expenses total $500,000? (Assume the tax rate is 35%)

Problem 4

Suppose a company introduces a new product. The original product sold for
$40 and had a variable cost of $28 per unit. The company is trying to
establish a sales price for the new product. The company expects to sell
5,000 units of the first product and expects to sell all 2,000 units of the new
product that will be produced at a variable cost of $15 per unit. If the
company has fixed expenses of $100,000, what should the sales price of the
second product be for the company to break even?

Problem 5
Given the income statement information below, calculate the break even
revenues for the company, assuming the proportion of sales of products does
not change.

Product A
Sales

200,000

Product B

Total

800,000

1,000,000

Total Variable Costs

550,000

150,000

400,000

Contribution Margin
450,000

50,000

400,000

Fixed Expenses

270,000

Operating Income
180,000

Problem 6
Given the following information, how many units of each product would the
company have to sell to achieve a target level of profit of $200,000,
assuming variable cost and fixed expense information does not change from
one year to the next? Last period the company sold 40,000 units of product
A at a price of $50, but this year the price will increase to $55, which will
increase the contribution margin for product A to $15 per unit. Product B
sold for $70 and cost $60 in variable cost per unit last year, but will now cost

$77. The fixed expense for the firm were $600,000 last year and total
operating income was $100,000.