Question

# For the coming year, Cleves Company anticipates a unit selling price of \$120, a unit variable...

For the coming year, Cleves Company anticipates a unit selling price of \$120, a unit variable cost of \$60, and fixed costsof \$552,000.

Required:

1. Compute the anticipated break-even sales (units).
units

2. Compute the sales (units) required to realize a target profit of \$270,000.
units

3. Construct a cost-volume-profit chart, assuming maximum sales of 18,400 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

 \$1,548,000 \$1,380,000 \$1,104,000 \$828,000 \$660,000

4. Determine the probable income (loss) from operations if sales total 14,700 units. If required, use the minus sign to indicate a loss.
\$

1) Contribution Margin per unit = Selling price - Variable cost

= \$120 - \$60 = \$60 per unit

Break Even Sales (units) = Fixed Cost/Contribution Margin per unit

= \$552,000/\$60 per unit = 9,200 units

2) Units required to be sold = (Fixed Cost+Target Profit)/Contribution Margin per unit

= (\$552,000+\$270,000)/\$60 per unit

= \$822,000/\$60 per unit = 13,700 units

3) Break Even Sales in \$ = Break even units*Selling price

= 9,200 units*\$120 per unit = \$1,104,000

The sales above \$1,104,000 will generate profit and sales below \$1,104,000 will result in loss.

 Sales Profit/(Loss) or Break Even \$1,548,000 Profit \$1,380,000 Profit \$1,104,000 Break Even \$828,000 (Loss) \$660,000 (Loss)

4) Net Income = Total Contribution Margin - Fixed Cost

= (14,700 units*\$60 per unit) - \$552,000

= \$882,000 - \$552,000 = \$330,000

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