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Chapter 20: Q20-14RQ (page 1119)
What is the breakeven point?
Answer
The breakeven point is company at no profit or loss condition because contribution is equal to total fixed cost.
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A furniture manufacturer specializes in wood tables. The tables sell for \(100 per unit and incur \)40 per unit in variable costs. The company has \(6,000 in fixed costs per month. The company desires to earn an operating profit of \)12,000 per month.
10. Calculate the required sales in units to earn the target profit using the equation method.
11. Calculate the required sales in units to earn the target profit using the contribution margin method.
12. Calculate the required sales in dollars to earn the target profit using the contribution margin ratio method.
13. Calculate the required sales in units to break even using the contribution margin method.
S20-9 Computing contribution margin, units and required sales to break even, units to achieve target profit
Compute the missing amounts for the following table:
What is target profit?
What is cost-volume-profit analysis?
What is operating leverage? What does it mean if a company has a degree of operating leverage of 3?
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