Problem 1: If the selling price is $8/unit, variable cost is $4/unit, and fixed cost is $50,00

Known Parameters
Selling price per unit 8
Fixed cost 50,000
Variable cost per unit 4

Variables
Number of units, X 12500 12,500 units is the BEP

Results
Total revenue 100000
Fixed cost 50,000
Total variable cost 50000
Total cost 100,000
Profit 0

Known Parameters
Selling price per unit 8
Fixed cost 50,000
Variable cost per unit 4

Variables
Number of units, X 100,000

Results
Total revenue 800000
If 100,000 units is sold, the profit is
Fixed cost 50,000 $350,000
Total variable cost 400000
Total cost 450,000
Profit 350,000
it, and fixed cost is $50,000, calculate BEP ( units and Sales Dollars), and the profit at 100,000 units
100,000 units
Problem 2: Tom Johnson Mfg intends to increase capacity through the addition of new eq
The fixed cost for proposal A is $50,000, and for proposal B is $70,000. The var
a.      What is the BEP in units for proposal A? in Sales Revenue?
b.     What is the BEP in units for proposal B? in Sales Revenue?
c.      If the expected volume is 8,500 units, which proposal should be cho
d.     If the expected volume is 15,000 units, which proposal should be ch

A.
Known Parameters
Selling price per unit 20
Fixed cost 50,000
Variable cost per unit 12

Variables
Number of units, X 6250 6250 units is the BEP

Results
Total revenue 125000
Fixed cost 50000
Total variable cost 75000
Total cost 125000
Profit 0

D. (a)
Known Parameters
Selling price per unit 20
Fixed cost 50000
Variable cost per unit 12

Variables
Number of units, X 15000

Results
Total revenue 300000
Fixed cost 50000
Total variable cost 180000
Total cost 230000
Profit 70000
Proposal D. (b) should be
chosen as it gives a higher
profit
city through the addition of new equipment. Two vendors have presented proposals.
or proposal B is $70,000. The variable cost for A is $12, and for B is $10. The revenue generated by each u
osal A? in Sales Revenue?
sal B? in Sales Revenue?
nits, which proposal should be chosen?
nits, which proposal should be chosen?

B. C. (a)
Known Parameters Known Parameters
Selling price per unit 20 Selling price per unit 20
Fixed cost 70000 Fixed cost 50000
Variable cost per unit 10 Variable cost per unit 12

Variables Variables
Number of units, X 7000 7000 units is the BEP Number of units, X 8500

Results Results
Total revenue 140000 Total revenue 170000
Fixed cost 70000 Fixed cost 50000
Total variable cost 70000 Total variable cost 102000
Total cost 140000 Total cost 152000
Profit 0 Profit 18000

Proposal C. (a) should be

chosen as it gives a higher
profit
D. (b)
Known Parameters
Selling price per unit 20
Fixed cost 70000
Variable cost per unit 10

Variables
Number of units, X 15000

Results
Total revenue 300000
Fixed cost 70000
Total variable cost 150000
Total cost 220000
Profit 80000
Proposal D. (b) should be
chosen as it gives a higher
profit
enue generated by each unit is $20.

C. (b)
Known Parameters
Selling price per unit 20
Fixed cost 70000
Variable cost per unit 10

Variables
Number of units, X 8500

Results
Total revenue 170000
Fixed cost 70000
Total variable cost 85000
Total cost 155000
Profit 15000