Asked by MUHAMMAD SUFYAN on Jul 07, 2024
Verified
Silver River Company sells products S and T and has made the following estimates for the coming year:? 
Fixed costs are estimated at $202,400. Determine (a) the estimated sales in units of the overall product necessary to reach the break-even point for the coming year, (b) the estimated number of units of each product necessary to be sold to reach the break-even point for the coming year, and (c) the estimated sales in units of the overall product necessary to realize an operating income of $119,600 for the coming year. If required, round interim calculations to two decimal places.
Break-Even Point
The level of production or sales at which revenues equal expenses, resulting in zero profit or loss.
Operating Income
Earnings before interest and taxes, presenting a company's profit from regular operational activities.
Fixed Costs
Fixed Costs are business expenses that remain constant regardless of the level of production or sales activities, such as rent and salaries.
- Compute the point at which costs and revenue balance out in both unit and monetary terms for scenarios involving either one or several products.
- Ascertain the impact of sales composition on an organization's profit margins and break-even assessments.
- Utilize fixed and variable cost principles to calculate the necessary sales for attaining desired profit levels.
Verified Answer
AH
Ayesha HussainJul 14, 2024
Final Answer :
(a) Unit Selling Price = ($30 × 60%) + ($70 × 40%) = $46.00Unit Variable Cost = ($24 × 60%) + ($56 × 40%) = $36.80Unit Contribution Margin = $46.00 - $36.80 = $9.20$202,400/$9.20 = 22,000 overall units
(b) S: 13,200 units (22,000 units × 60%)T: 8,800 units
(22,000 units × 40%)
(c) Sales = ($202,400 + $119,600)/$9.20 = 35,000 units
(b) S: 13,200 units (22,000 units × 60%)T: 8,800 units
(22,000 units × 40%)
(c) Sales = ($202,400 + $119,600)/$9.20 = 35,000 units
Learning Objectives
- Compute the point at which costs and revenue balance out in both unit and monetary terms for scenarios involving either one or several products.
- Ascertain the impact of sales composition on an organization's profit margins and break-even assessments.
- Utilize fixed and variable cost principles to calculate the necessary sales for attaining desired profit levels.