WORKSHEET 1 ANSWERS - 2023

Problem 1:
Regent
Enterprises has the following revenue and cost functions:
Revenue = $60 per unit
Fixed Costs =$200,000
Variable Cost = $8 per unit
What is the breakeven point in units and in sales dollars?

Problem 1
BEP in units = 3,846.15 or 3,847
BEP in dollars = $230,769

Problem 2:
Smith & Forest Enterprises has the following revenue and cost functions:
Revenue = $30 per unit
Fixed costs = $400,000
Variable costs = $22 per unit
What is the breakeven point in units? In dollars?

Problem 2:
X = 50,000 Units
$1,500,000

Problem 3:
In each of the following situations, how many units must be sold for the company to break even ? .
a. Total fixed costs are $90,000, and the unit contribution margin is $5.
b. Unit selling price is $8, unit variable cost is $5, and total fixed costs are $48,000.
c. Unit selling price is $10, contribution margin is 25 percent of revenue, are total fixed costs are $30,000.
d. Unit variable cost is 80 percent of the unit selling price, total fixed costs are $48,000, and unit selling
price is $12.
e. Unit variable cost is $5, contribution margin per unit is $3, and total fixed costs are $24,000. Compute
total sales at the breakeven volume in addition to total number of units.

Problem 3:
a.18,000
b.16,000
c. 12,000
d.20,000
e.64,000

Problem 4:
Alder-Birch Co. publishes paperback cartoon books. The following operational data relate to a typical month:
Unit sales price $8.00
Unit variable cost $2.60
Fixed costs $16,200
Current volume of books 3,200
The company is considering an expansion that would increase monthly fixed costs by $2,700. If it does,
production and sales will increase by 1,000 books.

a. Without considering the expansion, calculate the firm's breakeven point and its monthly before-tax
income.
b. Recalculate breakeven point in books and monthly before-tax income assuming that the company
undertakes the expansion.

Problem 4(a)
Break even
3,000 units
$1,080

Problem 4(b) After Expansion

1|Page
3,500 units
$3,780

Problem 5:
The University of Guyana Printing Unit prints DPM 320 workbooks for sale to students. The following operational
data relate to a typical month:
Unit Sales price = $8.00
Unit Variable Cost = $1.60
Fixed Costs = $18,000
Current Volume = 3,200 books.
The unit is considering expansion that would cost another $4,000 in monthly fixed costs. If it does, production and
sales will increase by 2,000 books.
a. Without considering the expansion, what is the firm’s break-even point and its monthly before-tax profit.
b. Recalculate break-even point in books and monthly before-tax profit assuming the unit undertakes the
expansion.

Problem 5
a. 2,813 books (rounded)
$2,480
b. 438 books (rounded)
$11,280

Problem 6:
Office Supply Co. is planning to make and sell 10,000 computer disk trays. Fixed costs are $40,000, and variable
costs are 60 percent of the selling price. What must the selling price be for the company to earn $10,000 of
before-tax income on the trays?

SAME AS SEVEN

Problem 7:
Metro is planning to photocopy and sell 10,000 economics textbooks for sale to first-year students. The fixed
costs associated with this venture are $400,000 and the variable costs are 60% of the selling price. What must
the selling price be for Metro to earn $100,000 profit before tax.

Answer: $125

Problem 8:
Boiler Maker, Inc., manufactures home furnaces that sell for $800. The unit costs are:
Direct materials $275
Direct labour $150
Variable factory overhead $130
Variable selling expenses $45
Annual fixed factory over head is $100,000 and annual fixed selling and administrative expenses are $120,000.
The company is in a 30 percent tax bracket. How many furnaces does the company need to make and sell to
earn $140,000 after-tax income?

Problem 8:
2,100 Units

Problem 9:
Compute the number of units that must be sold and the total sales in each of the following situations:
a. The company's income goal is $40,000. Total fixed costs are $80,000, unit contribution margin is $5, and
unit selling price is $8. 24,000 units/$192,000
b. The company's income goal is $25,000 after tax, and its tax rate is 40 percent. Unit variable cost is $6,
unit contribution margin is $4, and total fixed costs are $40,000. 20,417 units/$204,170
c. The company's after-tax income goal is $54,000, and the tax rate is 40 per cent. Unit variable cost is 70
percent of the $10 unit selling price, and total fixed costs are $60,000. 50,000 units/$500,000
d. The company's after-tax income goal is $30,000, and the tax rate is 50 per cent. Unit contribution margin
is $3, unit variable cost is 70 percent of the unit selling price, and total fixed costs are $60,000.
40,000/$400,000

2|Page
Problem 10: CVP (Sales Mix)
The National Newspaper Company produces and sells two products dailies: The Guardian and The Star. The
company's predictions of sales volume, selling price, and variable cost per unit for each product for next year are
as follows:

The total fixed costs for the National Newspaper Company are $50,000.
Sales for The Guardian and The Star are expected to be 10,000 and 30,000 units respectively.
The selling price of The Guardian is $10 while that of The Star is $12.
The variable cost per unit of The Guardian is $6 and for The Star it is $10.

Required:
Find the sales mix break even point in units and dollars

Problem 10
B-E units of A = 5,000 = 5,000/$50,000
B-E units of B = 5,000= 15,000/180,000

Problem 11: CVP (Sales Mix)

The Department of Agriculture has an unit which distributes seedlings at minimum cost , a standard variety and a
high yielding variety. The budgeted income statement of the unit follows.
Standard Resistant
Variety Variety
Sales in units 150,000 50,000
Sales @ $20 and $30 per unit $3,000,000 $1,500,000
Variable costs @ $14 and $18 per unit $2,100,000 $ 900,000
Contribution margins $ 900,000 $ 600,000
Total Fixed costs $1,200,000

Required
a. Compute the break-even point in units, assuming that the planned sales mix is maintained.
40,000/120,000
b. Compute the break-even point in units (a) if only standard seedlings are sold and (b) if only resistant
seedlings are sold. 200,000/100,000
c. Suppose 200,000 units are sold, but only 20,000 are resistant seedlings. Compute the operating income.
Compute the break-even point if these relationships persist in the next period. $120,000; 18,182 and
163,638.

Problem 12:
The Department of Culture has three types of miniature mashramani souvenirs for sale. These souvenirs- Type
A, Type B and Type C - have contribution margins of $3, $2, and $1, respectively. The co-ordinator foresees sales
of 200,000 units in the coming period, consisting of 20,000 Type A, 100,000 Type B, and 80,000 Type C. The
department’s fixed costs for the period are $255,000.
Required
a. What is the company break-even point in units, assuming that the given sales mix is maintained? 150,000
units
b. If the mix is maintained, what is the total contribution margin when 200,000 units are sold? $340,000
What is operating income? $85,000
c. What would operating income become if 20,000 units of Type A, 80,000 units of Type B, and 100,000
units of Type C were sold? $65,000. What is the new break-even point in units if these relationships
persist in the next period 159,380 units

Problem 13:
Get-In-Line Automobile Company manufactures three types of cars, all of which are sold at wholesale to dealers
throughout the world. Compact models manufactured by Get-In-Line sell at an average price of $2,200, and
variable costs per unit total $1,900. Standard-size cars sell at an average price of $3,700, and variable costs per
unit equal $3,000. Luxury models sell at an average price of $6,000, and the variable costs per unit are $5,000.
Total fixed costs for the company are estimated at $1,080,000,000.

a. The company's marketing department estimates that next year's unit sales mix will be 30 percent
compact, 50 percent standard, and 20 percent luxury. What is the breakeven point in units and sales for
the firm? 168,750 units Units BE/ Sales?????
b. If the company has an after-tax income goal of $1 billion and the tax rate is 50 percent, how many units of
each type of car must be sold for the goal to be reached? Answer??????
c. Assume the sales mix shifts to 50 percent compact, 40 percent standard, and 10 percent luxury. How
does this mix affect your answer to part b? Revise calculations before you comment!!

3|Page