Question

HW 1 BEP Problem 2 Fixed Production Level

Fixed costs = $ 30/hr

Variable cost = $16/hr +2,500

Semivariable cost = $14/hour + $500

Required Return = $3,000

Tax rate = .40

Revenue = $15/unit

Production Units = 1,000 units

Time period = 200 hours

Find the following four break-even points in number of hours:

Shutdown point:                     

Break-even at costs:

Break-even at required return:

Break-even at required return after taxes:

Find the profit for time period of 100 hours in dollars:

Answer 1

Solution:

Break-even: (Fixed Cost + Semi Variable Cost)/Contribution

Wherein Contribution: Sales-Variable Cost

Fixed Cost: $ 30/hr

= $ 30X200 hours = $ 6000

Semi-Variable Cost: $ 14/hr + $ 500

= $14X200 + $ 500

= $2800+ $500

= $ 3300

Variable Cost: $ 16/hr + $ 2500

= $ 16X200+ $ 2500

= $ 3200+ $2500

= $ 5700

Sales/Revenue: Revenue per unit X production units

=$ 15 per unit X 1000 units

= $15000

Contribution: Sales- Variable Cost

=$ 15000- $5700

= $9300

Break-even at cost : (Fixed Cost+ Semi Variable Cost)/Contribution

= ($ 6000 + $ 3300)/ $9300

= $ 9300/$ 9300

= $ 1