Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per...
Capital One produces a single product, which it sells for $8.00
per unit. Variable costs per unit equal $1.60. The company expects
short-term fixed costs to be $8,320 for the coming month, at the
projected sales level of 12,000 units. Management is considering
several alternative actions designed to improve operating results.
In conjunction with this, they have created a profit-planning (that
is, a CVP) model, which can be used to evaluate different
scenarios.
What is Capital One's current break-even point in terms of number
of units for the month?
Multiple Choice
-
2,508units.
-
7,200 units.
-
1,300 units.
-
5,200 units.
Homework Answers
Solution:- Breakeven units = 1,300 units
Fixed cost = $8,320
Contribution per unit = $8.00 - $1.60 = $6.40
Breakeven units = Fixed cost/contribution per unit
= 8,320/6.40
= 1,300 units
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