Question

Required information (The following information applies to the questions displayed below) Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year's plans call for a $190 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $334,400, up to a maximum capacity of 550,000 yards of rope Forecasted variable costs are $111 per 100 yards of XT rope. 1. Estimate Product XT's break-even point in terms of sales units and sales dollars. (1 unit - 100 yards) (Do not round intermediate calculations.) per 100 yds. Contribution Margin Sales Less Variable cost Contribution margin Contribution Margin ratio Choose Numerator: Choose Denominator - Contribution Margin Ratio Contribution margin ratio

Answer 1

Break even point is that number of units of sales or amount of sales at which there is no profit or loss. At this point fixed costs is equal to the contribution (sales - variable cost), hence we get no profit no loss.

Each part of the question is solved with the formulas:

1.

(lunit = 100 yards) selling Price = $190 per 100 yards Variable cast = $114 per 100 yards Fixed cost = $334400 Ans] in and contribution Margin sales Less: Variable cost Contribution Margin per 100 yards $190 $ 114 $ 76 contribution Margin Ratio contribution Margin Ratio = contributions per unit x 100 sales per unit 76 -xlos 190 = 40% units: a) Break-even - point in terms of sales Fixed costs contribution Margin - 3,34,400 76 = 4400 units :. Break even point is 4400 units ou 440000 yards

2.

clb Break even point in terms of sales dollars - Faced costs Contribution Margin Ratio = 334400 40% - $ 8,36,000 . Break-even point in terms of sales dollar is & 8, 36000 ta oldindan M ndio