Question

need help mainly on how and why

to get 2B

pls explain why it is that specific answer

Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: "Wes, I'm not sure how to go about answering the questions that came up at the meeting with the president yesterday." "What's the problem?" "The president wanted to know the break-even point for each of the company's products, but I am having trouble figuring them out." "I'm sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00." Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below: Annual sales volume Unit selling price Variable expense per unit Velcro 100,000 $1.65 $1.25 Metal 200,000 $1.50 $0.70 Nylon 400,000 $0.85 $0.25 Total fixed expenses are $400,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories, Required: 1. What is the company's over-all break-even point in dollar sales?

Answer 1

The overall profit of company will be -$240,000

i.e. a loss of $240,000

Break even point is the point at which fixed costs equals contribution margin and net operating income is zero

Hence, when the company sells break even units of each product, it will consider only the avoidable fixed costs of each product and hence, no contribution margin will be generated towards the common fixed costs of $240,000

And will hence, lead to a overall loss of $240,000