Friday, October 10, 2014

Using break-even analysis A company has prepared the following statistics regarding its production...

Using break-even analysis

A company has prepared the following statistics regarding its production and sales at different capacity levels.

Capacity level

60%

80%

100%

Units

60,000

80,000

100,000

Sales

240,000

$320,000.00

$400,000

Total costs:

   

Variable

$120,000

$160,000.00

$200,000

Fixed

150,000

150,000

150,000

Total costs

$270,000

$310,000

$350,000

Net operating income (loss)

($30,000)

$10,000

$50,000

1. At what point is break-even reached in sales dollars? In units?

2. If the company is operating at 60% capacity, should it accept an offer from a customer to buy 10,000 units at $3 per unit?

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