Auto Tires Inc. sells tires to service stations for an average of $45 each. The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000. Other monthly fixed costs of the company total $12,000.
Required:
a. What is the break-even level in tires?
b. What is the margin of safety assuming sales total $90,000?
c. What is the break-even level in tires assuming variable costs increase by 20 percent?
d. What is the break-even level in tires assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150?

Question

Quizplus · Accepted Answer

The Answer of Auto Tires Inc. sells tires to service stations for an average of $45 each. The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000. Other monthly fixed costs of the company total $12,000.
Required:
a. What is the break-even level in tires?
b. What is the margin of safety assuming sales total $90,000?
c. What is the break-even level in tires assuming variable costs increase by 20 percent?
d. What is the break-even level in tires assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150?