Breakeven Analysis

| February 6, 2015

Assignment 7:

Breakeven Analysis

Prepare breakeven analysis and a C-V-P analysis planning future sales using the information below.
Breakeven Analysis and 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, and fixed selling and administrative costs are $300,000 per year. The current sales price is $23 per unit.

1. What is the breakeven point in (a) sales units and (b) sales dollars?

2. How many units must Write Company sell to earn a profit of $240,000 per year?

3. 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 sales 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 $23 per unit.

o a. What amount of fixed costs was covered by the total contribution margin of the first 30,000 units sold?

o b. What contribution margin per unit will be needed on the remaining 130,000 units to cover the remaining fixed costs and to earn a profit of $210,000 this year?
Required references in APA style

Use excel sheet

Explain calculations as side tips

Document Preview:
Module 7: Budgeting – Part II Content Mod 7: For Your Success Learning Outcomes Identify the elements of the master budget. Prepare a master budget. Mod 7: Readings Required Chapter 6 in Managerial Accounting Module 7: Budgeting – Part II   Table of Contents the Master Budget All Content I. Compiling the Master Budget The process of compiling the master budget includes every functional area of the organization. Each manager that is responsible for a portion of the budget must submit his or her budget to the controller of the organization who assembles the budget components together and prepares the budgeted financial statements. As described above, the budget process begins with the strategic plan. The strategic plan’s long term goals include metrics that are met through implementing strategy and are measured in financial terms. The budget communicates the strategic plan through the financial projections it presents. The following exhibits present a master budget for a manufacturing organization. The master budget process begins with the projected sales budget. Next the product cost budgets are prepared that will flow into the cost of goods sold budget that will flow into the budgeted income statement. The figures from the sales budget are presented to justify the number of units that will have to be manufactured. The desired ending inventory for the first quarter (3000 units) becomes the desired beginning inventory for the second quarter because the second quarter begins the day after the first quarter, so the beginning inventory for the second quarter is the same as the ending inventory for the first quarter. The materials purchases…


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