PROBLEM SOLVING: (show step by step solution) Break-even and target profits. Analysis of the operations of FAST Company shows the fixed costs to be P200,000 and the variable costs to be P8 per unit. Selling price is P16 per unit. Derive the break-even point expressed in units. How many units must the firm sell to earn a profit of P280,000? What would profits be if revenue from sales were P2,000,000?
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PROBLEM SOLVING: (show step by step solution)
Break-even and target profits. Analysis of the operations of FAST Company shows the fixed costs to be P200,000 and the variable costs to be P8 per unit. Selling price is P16 per unit.
- Derive the break-even point expressed in units.
- How many units must the firm sell to earn a profit of P280,000?
- What would profits be if revenue from sales were P2,000,000?
Step by step
Solved in 4 steps
- Given the following, solve the independent questions using the CVP analysis. Selling Price = 30 Variable Cost per Unit = 20 Total Fixed Cost = 60,000REQUIRED: 1 Find the following functions: • Total Revenue = [TR] • Total Variable Cost = [TVC] • Total Cost = [TC] • Total Profit = [TP] 2 What is the volume of production for the business firm not to incur any profit nor loss? 3 At zero quantity of production, how much is the total cost? 4 What is the volume of production if the company wants to earn 100,000 profit?Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000. Q1. Compute the contribution margin percentage. Q2. Compute the selling price if variable costs are $16 per unit. Q3. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars. Q4. What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?compute for the following items: g. If breakeven sales in units will increase by 10,000 units, how much will be the increase/decrease in profits? h. If breakeven sales in units will decrease by 4,000 units, how much will be the increase/decrease in profits? i. If the firm wants to increase its current profits by P 60,000. How much sales revenue does it have to make?
- Solve the following independent cases and label your supporting computations properly. A) The company's projected profit for the coming year is as follows: Total P 200,000' 120,000 80,000 64,000 16,000 Per Unit P 20 Sales Less: Variable Costs 12 P 8 Contribution Margin P Less: Fixed Costs Net Income 1. Compute the additional profit that the company would earn if sales were P25,000 more than expected. B) KTA sells a special type of health food at a price of P16 per pound. Last year, it purchases this food from its supplier at a cost of P12 per pound. The supplier informed KTA that its cost increases and that this product will now be priced at P14 a pound. Over the years, KTA established a steady market and intends to pass the cost increase along to its customers and also add a P1 per unit to the price for additional profit. Fixed cost for the year are not expected to change and will remain at P34,000. Income tax rate is 32%. The net income after tax last year was P24,000. 2. If KTA can…Many times the selling price of a product p, is related to demand D, according to the relationship p=a - bD. However, a company has found that the price of their product can be related to demand (in units per year) according to the following equation: p=108.5 – 2.08D⁰.75. In addition, there is a fixed cost of P50,000 per year and the variable cost tomanufacture the product is P68 per unit. What is the level of demand which maximizes sales? What is the maximum sales? What level of demand maximizes profit? What is the maximum profit? What are the breakeven quantities of this product if p=678.39-1.08D?Suppose ABC Corp’s break-even point is revenues of $1,100,000. Fixed costs are $660,000 a. Calculate the contribution margin percentage. b. Calculate the selling price if variable costs are $16 per unit. c. Suppose 75 000 units are sold. Calculate the profit earned. d. Will the company be profitable if able to sell 30,000 units? Explain. c. What should the company do to increase its profit above break-even point?
- . If a firm's margin of safety is 35% on sales of P200,000, then its margin of safety on sales of P300,000 will be (assume fixed costs, the variable cost per unit, and the sales price per unit do not change): a.P105,000 b.P170,000 c.P100,000 d.P 35,000Sales Beer sales Food sales Other sales Total sales Less cost of sales Gross margin Less marketing and administrative expenses Operating profit of pursuing capital through private investors and financial insti Sales Beer sales (48% of total sales) Food sales (55% of total sales) Other sales (5% of total sales) Total sales Variable Costs Beer (15% of beer sales). Food (35% of food sales) Other (33% of other sales) Wages of employees (25% of sales) Supplies (1% of sales) Utilities (3% of sales) Other: credit card, miscellaneous (2% of sales) Total variable costs Contribution margin Fixed Costs Salaries: manager, chef, brewer Maintenance Advertising Other: cleaning, menus, miscellaneous Insurance and accounting Property taxes Depreciation $ 789,208 1,885,158 98,658 $ 1,973,000 530,738 $1,442,262 1,128,430 $ 313,832 Debt service (interest on debt) Total fixed costs Operating profit $ 789,200 1,885,158 98,650 $ 118,388 379,803 32,555 493,258 19,730 58,898 39,268 $ 135,500 30,200 28,200…Suppose ABC Corp’s break-even point is revenues of $1,100,000. Fixed costs are $660,000A ACalculate the contribution margin percentage. B. Calculate the selling price if variable costs are $16 per unit.c. Suppose 75 000 units are sold. Calculate the profit earned. D. Will the company be profitable if able to sell 30,000 units? Explain. c. What should the company do to increase its profit above break-even point?
- Use the information provided below to answer the following questions independently: 3.2.1 If Kempster Limited decides on a profit objective of R400 000, calculate the target sales volume. 3.2.2 Calculate the total Marginal Income and Profit/Loss if the company decides to reduce the selling price to R28 per unit. INFORMATION Kempster Limited expects to incur the following costs to produce and sell 20 000 units of its product at R30 each: Variable manufacturing cost R14 per unit Fixed manufacturing cost R100 000 Variable marketing cost 20% of sales Fixed marketing and administrative cost R40 000Help me pleaseQ2. Suppose that Nafitol Company has a fixed cost of ETB 35,000 and VC of ETB 1.75 per unit for its products. Let us further consider that selling price is birr 2.7 per unit. Required: A. Write the revenue and the cost equation of the company B. At what level of production output is the company Break-even? C. What is the amount of the revenue when the company produces 300,000 units? D. If the company plans to earn a profit of 7000, what amount of quantity has to be produced?