Download Unit 7 Cost Volume Profit Analysis and Break Even and more Lecture notes Cost Accounting in PDF only on Docsity! Extra Practice Problems – Unit 7 Cost Volume Profit Analysis and Break Even Q1. A small manufacturing operation can produce up to 250 units per week of a product that it sells for $20 per unit. The variable costs per unit is $12 and the fixed costs per week are $1200. a. How many units must the firm sell per week to break even? (150 units) b. Determine the firm’s weekly profit or loss if it sells: a. 120 units per week ($240 loss) b. 250 units per week ($800 profit) c. At what level of sales will the net income be $400 per week? (200 units) Q2. Armena Manufacturing Corp. manufacturers composters. It estimates that material costs are $43 per composter. Armena sells its composters for $70 each and it can produce a maximum of 3200 composters per month. Lease and overhead expenses are $648,000. a. What is the break-even volume per month? (2000 composters per month) b. What is the monthly net income at a volume of 2500 composters per month? ($13,500/month) c. What is the monthly net income if Armena operates at 50% of capacity during a pandemic? ($10,800/month loss) Q3. Pendryl Office Supplies is evaluating the profitability of leasing a photocopier for its customers to use on a self serve basis at 10 cents/copy. The copier may be leased for $300 per month plus 1.5 cents per copy on a full service contract. Pendryl can purchase paper at $5 per 500 sheet ream. Toner costs $100 per bottle, which in normal use will last for 5000 pages. Pendryl thinks that there are additional other costs of 0.5 cents per copy. a. How many copies per month must be sold in order to break even? (6000 copies/month) b. What will be the increase in monthly profit for each 1000 copies sold above the break-even point? ($50 per month) Q4. The Pipestone ski club is planning a weekend package for its members. The members will each be charged $270. For a group of 15 or more, the club can purchase a two-day downhill pass and two nights’ accommodations for $220 per person. A 36-passenger capacity bus can be chartered for $1400. a. How many must sign up to break-even? (28) b. If the bus is filled, how much profit will the club make? ($400) c. If the local Lion’s Club agrees to cover any loss up to $400, what is the minimum number of participants required? (20)
