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Breakeven point

Home › Forums › FIA Forums › MA2 Managing Costs and Finance Forums › Breakeven point

This topic contains 5 replies, has 3 voices, and was last updated by  secondstar 10 months, 2 weeks ago.

Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • December 1, 2017 at 11:05 am

    maan87
    Participant

    Dear sir, help me with the folowing:

    S.p/unit 160
    V.cost/unit 80
    Fixed cost/unit 33

    Budgeted sales volume for the period is 50,000 units. Production capacity is 54,000 units for the period.

    What is the breakeven volume for the period?

    I calculated it =1782,000/80 = 22,275 units but answer is 20,625 units ( In answer to find total budgeted fixed cost he has taken sales volume istead of budgeted production volume)…but as per my knowledge it should be production volume to calculate budgeted fixed cost.
    Thanx

    December 8, 2017 at 10:42 am

    secondstar
    Moderator

    Production Capacity is not something to rely on when calculating expected Fixed Costs.
    54,000 units are ones that company CAN produce. But there’s no assurance that company WILL produce that much. So, we cannot rely on this quantity for our budget calculations.
    Budgeted Sales Volume is the minimum quantity that company WILL produce. So, we can use this quantity as a base to calculate budgeted fixed costs.

    Hope it helps.

    March 30, 2018 at 9:25 pm

    lofty
    Participant

    hi need help with this question.
    A company has establish the following information for the costs and revenues at an activity level of 500units
    Direct material 2500
    Direct labour 5000
    production overheads 1000
    selling costs 1250
    TOTAL COST 9750
    SALES REVENUE 17500
    PROFIT 7750

    20% of the selling costs and 50% of the production overheads are fixed over all levels of activity.
    The profit at an activity levels of 1000units would be……………

    please i need an explanation to solve this problem

    March 31, 2018 at 5:58 pm

    secondstar
    Moderator

    DM/unit = 2,500/500 = $5
    DL/unit = 5,000/500 = $10
    POH:
    Variable = $1,000*50% = $500 = $1/unit
    Fixed = $500
    Selling Costs:
    Variable = $1250*80% = $1,000 = $2/unit
    Fixed = $250

    Selling Price/unit = $17,500/500 = $35

    For 1,000 units:
    DMC = $5*1,000 = $5000
    DLC = $10*1,000 = $10,000
    Variable POH = $1*1,000 = $1,000
    Fixed POH = $500
    Variable Selling Costs = $2*1,000 = $2,000
    Fixed Selling Costs = $250
    Total Cost = $18,750
    Sales Revenue = $35*1,000 = $35,000
    Profit = $16,250

    April 3, 2018 at 10:18 pm

    lofty
    Participant

    thank you very much
    but still how did u came about the 1 unit or you just assumes

    April 4, 2018 at 11:12 am

    secondstar
    Moderator

    @lofty said:
    thank you very much
    but still how did u came about the 1 unit or you just assumes

    The question has mentioned that the cost information is for an activity level of 500 units.

  • Author
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