Reading 46: Measures of Leverage-LOS d 习题精选 2011, net, determine, company, center

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Session 11: Corporate Finance
Reading 46: Measures of Leverage

LOS d: Calculate the breakeven quantity of sales and determine the company's net income at various sales levels.

 

 

Wanton’s San Y’isidro Co. manufactures custom door knobs for international clients. Average Revenue is $35 per unit, variable costs are $15 per unit, and total costs are $200,000. If sales are 10,000 units, what is the firm's breakeven sales quantity?

A) 2,500 units.

B) 1,750 units.

C) 3,000 units.

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For this problem you need 2 equations.

Break-even quantity = Fixed Costs / (Price - Variable cost)

Q = FC / (P - V)

Fixed Costs = Total Costs - Variable Costs

FC = TC - VC = 200,000 - 150,000 = 50,000

Q = 50,000 / (35 - 15) = 2,500

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

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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) $2.25.

B) $2.50.

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.

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