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sheet 2 Breakeven Analysis

The document outlines various breakeven analysis scenarios for different companies and products, detailing fixed and variable costs, selling prices, and production levels. It includes calculations for determining breakeven points, annual profits, and the impact of cost changes on profitability. Each scenario provides specific financial data to analyze the profitability of manufacturing and selling different products.

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13 views

sheet 2 Breakeven Analysis

The document outlines various breakeven analysis scenarios for different companies and products, detailing fixed and variable costs, selling prices, and production levels. It includes calculations for determining breakeven points, annual profits, and the impact of cost changes on profitability. Each scenario provides specific financial data to analyze the profitability of manufacturing and selling different products.

Uploaded by

ibrahem9hakim5
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Course Title: Industrial and legislation regulating

Course Code: PRD 456


Course Coordinator: Dr. Omnia Osman Fadel

Sheet 2: Breakeven Analysis Solution


1- A Company sells premium water bottles with Fixed costs (property taxes, lease,
executive salaries) total $100,000 and Variable cost per water bottle is $2, and the selling
price is $12 . find the break-even point.

2- The fixed costs at Company X are $1 million annually. The main product has revenue of
$8.90 per unit and $4.50 variable cost. (a) Determine the breakeven quantity per year, and
(b)Annual profit if 200000 units are sold.

3- It costs $1000 for hand tools and $1.50 labor per unit to manufacture a product. Another
alternative is to manufacture the product by an automated process that costs $15,000,
with
a $0.50 per-unit cost. With an annual production rate of 5000 units, how long will it take
to reach the break-even point?

4- A product currently sells for $12 per unit. The variable costs are $4 per unit, and 10,000
units are sold annually and a profit of $30,000 is realized per year. A new design will
increase the variable costs by %20 and Fixed Costs by %10 but sales will increase to
12,000
units per year. (a) At what selling price do we break even, and (b) If the selling price is to
be kept same ($12/unit) what will the annual profit be?

5- Indira Industries is a major producer of diverter dampers used in the gas turbine power
industry to divert gas exhausts from the turbine to a side stack, thus reducing the noise to
acceptable levels for human environments. Normal production level is 60 diverter
systems
per month, but due to significantly improved economic conditions in Asia, production is
at
72 per month. The following information is available: Fixed costs FC = $2.4 million per
month, Variable cost per unit v = $35,000, Revenue per unit r = $75,000
(a) What is the current profit level per month for the facility?
(b) What is the difference between the revenue and variable cost per damper that is
necessary to break even at a significantly reduced monthly production level of 45 units, if
fixed costs remain constant?
Course Title: Industrial and legislation regulating
Course Code: PRD 456
Course Coordinator: Dr. Omnia Osman Fadel

6- A factory makes iron benches and wants to determine the break-even point. The total
fixed cost for his business is $60,000, and the variable cost is $40 per bench. He sells the
bench for $100 per unit.
a. determine the break-even point.
b. When Franco produces 1500 benches, the fixed cost is $120,000, and the total revenue
is $150,000. Determine the variable cost.

7- A dressmaker must incur a fixed cost of $45,000 to produce and sell a dress and
The variable costs would include the materials used to make each dress —
embellishment’s for $30, the fabric for the body for $20, inner lining for $10 — and the
labor required to assemble the dress, which amounted to one and a half hours for a
worker earning $50 per hour and If she sells the dress for $150 what is the breakeven
quantity ?

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