A breakeven analysis and a 0-V-P analysis planning future sales
Description: Prepare breakeven analysis and a 0-V-P analysis planning future sales using the information below. (100 pts) Breakeven Analysis a. Planning Future Sales Write Company has a maximum capacity of 200,000 units per year. Variable manufacturing costs are $12 per unit. Fixed overhead is $600,000 per year. Variable selling, and administrative costs are $5 per unit, a. fixed selling and administrative costs are $300,000 per year. The current sales price is $23 per unit. Required 1. What is the breakeven point in (a) sales units and (b) sales dollars?
- How many units must Write Company sell to earn a profit of S240,000 per year?
- A strike at one of the company’s major suppliers has caused a shortage of materials, so the current year’s production and sales are limited to 160,000 units. To partially offset the effect of the reduced on profit, management is planning to reduce fixed costs to $841,000. Variable cost per unit is the same as last year. The company has already sold 30,000 units at the regular selling price of S23 per unit.
a. What amount of fixed costs was covered by the total contribution margin of the first 30,000 units sold? b. What contribution margin per unit will be needed on the remaining 130,090 units to cover the remaining fixed costs and to earn a profit of S210,000 this year?
Sample Solution
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