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You are the new cost accountant for ABX Corporation. After careful review of the company’s operations you have been tasked to determine the company’s break-even point in units and dollars, the numbers sold to meet the company’s target profit and contribution income statement for both outcomes.Management has also asked that you discuss the risk, uncertainty, changing variables and margin of safety regarding Cost Volume Profit Analysis. Based on your discussion and calculations what would be your recommendation if the company wanted to increase variable cost by 20% and sales price by 5%? Support your recommendation.
ABX Corporation sold it's product for $600/unit. Fixed cost are $725,000 per year. Variable costs are $455 per unit. ABX Corporation desires a target profit of $1,250,000 per year.
Fixed cost is the cost which is to be incurred irrespective of the level of output. it has to bear even when the output is Zero. we cannot avoid the fixed cost. fixed costs will remain constant at any level of output.
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