Calculate the break even number of units

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Reference no: EM131849763

Financial Exercises

Part 1

"Using the table below, describe the types of budgets. In your description, include:

• The objective of the budget

• How the budget assists an organization in managing its financial activities

• What types of data need to be included in that specific budget

Type of Budget

Cash Flow

Operating

Sales

Static

Financial

Part 2

Complete the following problems using the following ratios:

Sales level at which operating income is zero

o If sales above breakeven, then profit

o If sales below breakeven, then loss

o Fixed expenses = total contribution margin

Total sales = total expenses

Break Even Point: Unit Sold = Fixed expenses + Operating Income / Contribution Margin per unit

Break Even Point: Sales $ = Fixed expenses + Operating Income / Contribution Margin Ratio

(1) Calculate the break even number of units if the fixed expenses are $7,000 and the contribution margin is $14 per unit.

(2) Calculate the break even sales dollars if the fixed expenses are $7,000 and the contribution ratio is 40%.

(3) Calculate the break even number of units with a target profit of $120,000 if the fixed expenses are $15,000 and the contribution margin is $60 per unit.

Part 3

Complete the following problems:

(1) How much will you have saved after 6 years by contributing $1,200 at the end of each year if you expect to earn 11% on the investment?

(2) A business owner plans to deposit his annual profits in an investment account earning a 9% annual return. If the owner starts with their first deposit today for $22,000 and expects to make the same profit for the next 7 years, how much will be saved for retirement at that point?

(3) An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes these contributions at the end of the next 20 years, what is the present value of this investment today?

(4) What is the present value (PV) of a 12-year lease arrangement with an interest rate of 7.5 percent that requires annual payments of $4,250 per year with the first payment being due now?

(5) A recent college graduate hopes to have $200,000 saved in their retirement account 25 years from now by contributing $150 per month in a 401(k) plan. The goal is to earn 10% annually on the monthly contribution. Will they have the $200,000 at the end of the 25 years?

Reference no: EM131849763

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