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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