Asked by Billy Bahous on May 30, 2024
Verified
For the current year ending January 31, Harp Company expects fixed costs of $188,500 and a unit variable cost of $51.50. For the coming year, a new wage contract will increase the unit variable cost to $55.50. The selling price of $70.00 per unit is expected to remain the same.
a.Compute the break-even sales (units) for the current year. Round your answer to the nearest whole number.
b.Compute the anticipated break-even sales (units) for the coming year, assuming the new wage contract is signed.
Break-even Sales
The amount of revenue needed to cover all fixed and variable costs, resulting in no profit or loss.
Variable Cost
Costs that change in proportion to the level of production or sales activity, such as raw materials and direct labor costs.
Fixed Costs
Fixed overheads that stay the same no matter how much is produced or sold, including rental fees or staff salaries.
- Ascertain the break-even point quantitatively in terms of units and monetarily, comprehending its importance in strategic business planning.
- Assess the impact of variations in sales, expenses, and pricing on the break-even point and profitability of a corporation.
Verified Answer
LN
Lungile NomfundoMay 31, 2024
Final Answer :
a.$188,500 ÷ ($70.00 - $51.50) = 10,189 units
b.$188,500 ÷ ($70.00 - $55.50) = 13,000 units
b.$188,500 ÷ ($70.00 - $55.50) = 13,000 units
Learning Objectives
- Ascertain the break-even point quantitatively in terms of units and monetarily, comprehending its importance in strategic business planning.
- Assess the impact of variations in sales, expenses, and pricing on the break-even point and profitability of a corporation.