Prepare breakeven analysis and a C-V-P analysis planning future sales using the
information below. (
Write Company has a maximum capacity of 200,000
units per year. Variable manufacturing costs are $12 per unit. Fixed overhead is
$600,000 per year. Variable selling and administrative costs are $5 per unit,
and fixed selling and administrative costs are $300,000 per year. The current
sales price is $23 per unit.
What is the breakeven point in (a) sales units and (b) sales dollars?
How many units must Write Company sell to earn a profit of $240,000 per
A strike at one of the company's major suppliers has caused a shortage of
materials, so the current year's production and sales are limited to 160,000
units. To partially offset the effect of the reduced sales on profit, management
is planning to reduce fixed costs to $841,000. Variable cost per unit is the
same as last year. The company has already sold 30,000 units at the regular
selling price of $23 per unit.
What amount of fixed costs was covered by the total contribution margin of
the first 30,000 units sold?
What contribution margin per unit will be needed on the remaining 130,000
units to cover the remaining fixed costs and to earn a profit of $210,000 this