FIN 200 WK 7 DAY 4 ANSWERS

Apr 18th, 2015
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FIN 200 WK 7 DAY 4 Problems11. Assuming that all other factors remain unchanged, determine how a firmsbreakeven point is affected by each of the following: The break-even point measures the necessary amountof sales needed in order to cover expenses (fixed and variable) and earn a net income of $0. Therefore,any decrease in sales or increase in expenses will raise the BE point and any increase in sales anddecrease in expenses will lower the BE point. The formula is written:BE Pt (Units) = (FC)/(P-VC)BE Pt (Sales) = (FC)/(CM/P)where: FC = Total Fixed CostsP = Sale Price Per UnitVC = Variable Cost Per UnitCM = Contribution Margin (=P-VC)a. The firm finds it necessary to reduce the price per unit because ofcompetitive conditions in the market. Increase, the company will have to sell more units in order tocompensate for the price reduction.b. The firms direct labor

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