Question

During the upcoming year De Anza Co. expects the following data: Expected unit selling price is:...

During the upcoming year De Anza Co. expects the following data:

Expected unit selling price is: $125

Expected unit variable cost is: $70

Expected total fixed costs are: $1,512,500

1. Calculate breakeven point in both units and dollars. (Show work in blank space below.) Round units to the nearest unit and round dollars to the nearest dollar.

2. Compute sales units required to realize income from operations of $630,000.

3. Construct a cost-volume-profit chart assuming maximum sales in the relevant range of 40,000 units. ( Use the available graph template below.) Label the following parts of the graph: Sales Revenue, Fixed Costs, Variable Costs, Total Costs, Profit Area, Loss Area, and Break Even Point.

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Answer #1

Ans:

1.       Contribution margin per unit=$125-$70=$55,contribution margin ratio= 55/125=44%

Breakeven point in units=Total fixed cost/contribution margin per unit=$1512500/55=27500 units

Breakeven point in dollars= Total fixed cost/contribution margin ratio=$1512500/44%=$3437500

2.       Income from operation= $630000

Add: Fixed costs= $1512500

Contribution= $2142500

Expected sales in units= contribution / contribution margin per unit

                                            = $2142500/55=38955 units

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