Question 1

Create a break-even chart for Harry.

Accepted Answer

The answer of Create a break-even chart for Harry....

Question 2

Construct a break-even chart for Birmingham's.

Accepted Answer

The answer of Construct a break-even chart for Birmingham's....

Question 3

On a break-even chart, the break-even point occurs at the intersection of the fixed expense line and the total revenue line.

Accepted Answer

The break-even point occurs at the intersection of the total expense line (which includes both fixed and variable expenses) and the total revenue line, not just the fixed expense line.

Question 4

Mini-Case 12-6: Crazy Harry's
The following is a pro forma income statement for Crazy Harry's.
Crazy Harry's
Pro Forma Income Statement
Sales $96,000
Cost of Goods Sold 46,240
Gross Profit $49,760
Fixed Expenses
Rent $2,400
Insurance 3,000
Salaries 16,500
Taxes 1,100
Miscellaneous Fixed Expenses 900
Total Fixed Expenses $23,900
Variable Expenses
Wages $11,200
Advertising 5,700
Benefits 2,800
Other Variable Expenses 1,120
Total Variable Expenses $20,080
Net Profit $5,040
-Calculate Harry's break-even point.

Accepted Answer

The answer of Mini-Case 12-6: Crazy Harry's
The following is a...

Question 5

Mini-Case 12-4: Calculating the Break-even Point
A small manufacturer plans to sell tents for $120 each. The variable cost for each tent is $90. Fixed costs for the process are estimated to be $36,000. How many tents must the company sell to break-even?
-Suppose that the manufacturer desires a profit of $9,000 on this product. How many units must be sold?

Accepted Answer

The answer of Mini-Case 12-4: Calculating the Break-even Point
A small...

Question 6

Refer to the following break-even chart to answer the question(s)below:
 
-The area labeled ________ is the "loss area."

Accepted Answer

The area labeled W is the "loss area" because it represents the area where the function is below the x-axis.

Question 7

Fixed expenses are those that do not vary with changes in the volume of sales, but do vary with production.

Accepted Answer

Fixed expenses do not vary with changes in the volume of sales or production. They remain the same regardless of changes in the level of activity.

Question 8

Refer to the following break-even chart to answer the question(s)below:
 
-Line T is the ________ line, while line S is the ________ line.

Accepted Answer

Line T represents total revenue, while line S represents total expenses. The break-even point is where these two lines intersect, indicating the point at which total revenue equals total expenses. Therefore, Option B (total expense; total revenue) is the correct answer.

Question 9

Mini-Case 12-1: Bowden Brake Service (Part A)
Jim Bowden, owner of Bowden Brake Service, is planning to expand his six-year-old brake service to include tune-ups and tire services. Based on budget estimates for the upcoming year, Jim expects net sales to be $825,000 with a cost of goods sold of $530,000 and total operating expenses of $210,000. From the budget he created, Jim computes fixed expenses to be $168,000, while variable expenses (including cost of goods sold)are $572,000. Jim is concerned that the new cost structure may damage his ability to produce a profit and he wants to perform a break-even analysis for the upcoming year to gain insight.
-If Jim were to reduce his fixed costs by 10 percent by reducing a middle management position, what benefit would that be to him and the company? What would his new contribution margin be?

Accepted Answer

The answer of Mini-Case 12-1: Bowden Brake Service (Part A)
Jim...

Question 10

Mini-Case 12-3: Birmingham's Stereo Shop
Birmingham's Stereo Shop expects net sales of $280,000 in the upcoming year, with a cost of goods sold of $173,600 and total expenses of $76,200. Birmingham expects variable expenses (including cost of goods sold)to be $195,700 and fixed expenses to be $54,100.
-What level of sales would Birmingham's have to achieve if it wanted to make a $25,000 profit?

Accepted Answer

The answer of Mini-Case 12-3: Birmingham's Stereo Shop
Birmingham's Stereo Shop...

Question 11

Refer to the following break-even chart to answer the question(s)below:
 
-The area labeled ________ represents the firm's fixed expenses, while ________ represents its variable expenses.

Accepted Answer

In a break-even chart, the area labeled X represents fixed expenses, while the area labeled Y represents variable expenses. This is because fixed expenses remain constant regardless of the level of output, while variable expenses increase as production levels increase. Therefore, the correct choice is B where X represents fixed expenses and Y represents variable expenses.

Question 12

What are the advantages and the disadvantages of using break-even analysis?

Accepted Answer

The answer of What are the advantages and the disadvantages...

Question 13

Refer to the following Gunther's Emporium information to answer the question(s)below:
Gunther's Emporium expects net sales of $2,396,919 for the upcoming year, with variable expenses totaling $1,813,443 and fixed expenses of $412,190.
-If Gunther's net profit target for the year is $190,000, what sales level must he achieve?

Accepted Answer

We can use the formula: 
Net Profit = Net Sales - Total Variable Expenses - Fixed Expenses
Substituting the given values: 
$190,000 = $2,396,919 - $1,813,443 - $412,190
Solving for the sales level: 
Sales level = $2,473,796

Question 14

The break-even point is the level of operation at which a business neither earns a profit nor incurs a loss, and lets the business owner know the minimum level of activity required to keep the firm in operation.

Accepted Answer

The definition of break-even point is correct.

Question 15

Why is it important for an entrepreneur, about to launch a business, to perform a break-even analysis? Describe the steps in calculating it.

Accepted Answer

The answer of Why is it important for an entrepreneur,...

Question 16

Explain the procedure for constructing a graph that visually portrays the firm's break-even point (the point where revenues equal expenses).

Accepted Answer

The answer of Explain the procedure for constructing a graph...

Question 17

Help Jim compute the break-even point for his brake service.

Accepted Answer

The answer of Help Jim compute the break-even point for...

Question 18

Compute a break-even point in dollars.

Accepted Answer

The answer of Compute a break-even point in dollars....

Question 19

If Harry's profit target is $15,000, what level of sales must be achieved?

Accepted Answer

The answer of If Harry's profit target is $15,000, what...

Question 20

Refer to the following break-even chart to answer the question(s)below:
 
-The area labeled ________ is the "profit area."

Accepted Answer

The answer of Refer to the following break-even chart to...

Quiz 12: Creating a Successful Financial Plan

Create a break-even chart for Harry.

Construct a break-even chart for Birmingham's.

On a break-even chart, the break-even point occurs at the intersection of the fixed expense line and the total revenue line.

Refer to the following break-even chart to answer the question(s) below: -The area labeled ________ is the "loss area."

Fixed expenses are those that do not vary with changes in the volume of sales, but do vary with production.

Refer to the following break-even chart to answer the question(s) below: -Line T is the line, while line S is the line.

Refer to the following break-even chart to answer the question(s) below: -The area labeled represents the firm's fixed expenses, while represents its variable expenses.

What are the advantages and the disadvantages of using break-even analysis?

The break-even point is the level of operation at which a business neither earns a profit nor incurs a loss, and lets the business owner know the minimum level of activity required to keep the firm in operation.

Why is it important for an entrepreneur, about to launch a business, to perform a break-even analysis? Describe the steps in calculating it.

Explain the procedure for constructing a graph that visually portrays the firm's break-even point (the point where revenues equal expenses).

Help Jim compute the break-even point for his brake service.

Compute a break-even point in dollars.

If Harry's profit target is $15,000, what level of sales must be achieved?

Refer to the following break-even chart to answer the question(s) below: -The area labeled ________ is the "profit area."

Quiz 12: Creating a Successful Financial Plan

Create a break-even chart for Harry.

Construct a break-even chart for Birmingham's.

On a break-even chart, the break-even point occurs at the intersection of the fixed expense line and the total revenue line.

Refer to the following break-even chart to answer the question(s) below: -The area labeled ________ is the "loss area."

Fixed expenses are those that do not vary with changes in the volume of sales, but do vary with production.

Refer to the following break-even chart to answer the question(s) below: -Line T is the ________ line, while line S is the ________ line.

Refer to the following break-even chart to answer the question(s) below: -The area labeled ________ represents the firm's fixed expenses, while ________ represents its variable expenses.

What are the advantages and the disadvantages of using break-even analysis?

The break-even point is the level of operation at which a business neither earns a profit nor incurs a loss, and lets the business owner know the minimum level of activity required to keep the firm in operation.

Why is it important for an entrepreneur, about to launch a business, to perform a break-even analysis? Describe the steps in calculating it.

Explain the procedure for constructing a graph that visually portrays the firm's break-even point (the point where revenues equal expenses).

Help Jim compute the break-even point for his brake service.

Compute a break-even point in dollars.

If Harry's profit target is $15,000, what level of sales must be achieved?

Refer to the following break-even chart to answer the question(s) below: -The area labeled ________ is the "profit area."

Refer to the following break-even chart to answer the question(s) below: -Line T is the line, while line S is the line.

Refer to the following break-even chart to answer the question(s) below: -The area labeled represents the firm's fixed expenses, while represents its variable expenses.