kim226

Jayco, Inc. has a division that makes red ink for the accounting industry. The unit has fixed costs of $10,000 per month, and is expected to sell 40,000 bottles of ink per month. If the variable cost per bottle is $2.00 what price must the division charge in order to breakeven?

A) $2.50.

B) $2.25.

C) $2.75.

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40,000 = $10,000/(P - $2)
40,000P – $80,000 = $10,000
P = $90,000/40,000 = $2.25.

kim226

Annual fixed costs at King Mattress amount to $325,000. The variable cost of raw materials and labor is $120 for the typical mattress. Sales prices for mattresses average $160. How many units must King Mattress sell to break even?

A) 40.

B) 8,125.

C) 2,708.

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QBreakeven = Fixed Cost / (Price – Variable Cost)
QBreakeven = $325,000 / (160 – 120) = 8,125

kim226

Jayco, Inc., sells blue ink for $4.00 a bottle. The ink's variable cost per bottle is $2.00. Ink has fixed cost of $10,000. What is Jayco's breakeven point in units?

A) 2,500.

B) 6,000.

C) 5,000.

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QBE = [FC] / (P - V)
QBE = [10,000] / (4.00 - 2.00) = 5,000

kim226

Yangtze Delta High Technology produces multimedia-enabled wireless phones. The factory incurs rent, depreciation, salary, and other fixed costs totaling RMB 10 million per year. Also, the company incurs annual interest of RMB 3 million on debt. Each phone sold by Yangtze Delta sells for RMB 200. The variable cost per phone is RMB 150. Yangtze Delta’s operating breakeven quantity of sales is closest to:

A) 200,000.

B) 260,000.

C) 65,000.

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The operating breakeven point is the quantity of product sold at which operating income is zero (revenue equals operating cost).
F = Fixed operating cost = RMB 10,000,000
P = Price per unit = RMB 200
V = Variable cost per unit = RMB 150
Operating breakeven quantity = F / (P − V) = 10,000,000 / (200 − 150) = 200,000.

terpsichorefan

thanks for sharing