The operating budget of the Omega Twelve Company contains the following information. a)Draw a detailed break-even chart.
b)Compute the break-even point as a percent of capacity.
c)Determine the break-even point in dollars if fixed costs are reduced by $11 200 while variable costs are changed to 62% of sales.

Question

The operating budget of the Omega Twelve Company contains the following information.  a)Draw a detailed break-even chart.
b)Compute the break-even point as a percent of capacity.
c)Determine the break-even point in dollars if fixed costs are reduced by $11 200 while variable costs are changed to 62% of sales.

Quizplus · Accepted Answer

The Answer is a)Let x represent the sales volume in dollars.
Total revenue: TR = x

a)Let x represent the sales volume in dollars. Total revenue: TR = x = = 58% of revenue = 0.58 Total cost: TC = 215 000 + 0.58x b)Using the contribution margin approach and assuming that P = $1.00, we obtain: CM = P-VC = 1-0.58 = 0.42 BE volume (in units)= = = 511904.76 = 511905 units Capacity = = 700 000 BE volume as a percent of capacity = = 73.13% c)FC = $203 800 and VC = 0.62, then CM = 1-0.62 = 0.38 CR = = = 0.38 BE in sales dollars = = = $536 315.79

=

= 58% of revenue = 0.58
Total cost: TC = 215 000 + 0.58x

b)Using the contribution margin approach and assuming that P = $1.00, we obtain:
CM = P-VC = 1-0.58 = 0.42
BE volume (in units)=

=

= 511904.76 = 511905 units
Capacity =

= 700 000
BE volume as a percent of capacity =

= 73.13%
c)FC = $203 800 and VC = 0.62, then CM = 1-0.62 = 0.38
CR =

=

= 0.38
BE in sales dollars
=

=

= $536 315.79

The Operating Budget of the Omega Twelve Company Contains the Following