What are breakeven sales in dollars?

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Reference no: EM13870894

1. Palmer's Gourmet Chocolates produces and sells assorted boxed chocolates. The unit selling price is $50, unit variable costs are $25, and total fixed costs are $2,000.

1a. How many boxes of chocolates must Palmer's Gourmet Chocolates sell to breakeven?

1b. What are breakeven sales in dollars?

2. Extreme Sports received a special order for 1,000 units of its extreme motorbike at a selling price of $250 per motorbike. Extreme Sports has enough extra capacity to accept the order. No additional selling costs will be incurred. Unit costs to make and sell this product are as follows: Direct materials, $100; direct labor, $50; variable manufacturing overhead, $14; fixed manufacturing overhead, $10, and variable selling costs, $2.

2a. List the relevant costs.

2b. What will be the change in operating income if Extreme Sports accepts the special order?

2c. Should Extreme Sports accept the special order? Why or why not?

3. Totally Technology manufactures Cameras and Video Recorders. The company's product line income statement follows:

 


 
     
 

Camera

Video Recorder

Total

 

Sales revenue

$3,00,000

$1,00,000

$4,00,000

 

Cost of goods sold

       

Variable

$75,000

$49,000

$1,24,000

 

Fixed

$82,000

$28,000

$1,10,000

 

Total cost of goods sold

$1,57,000

$77,000

$2,34,000

 

Gross profit

$1,43,000

$23,000

$1,66,000

 

Marketing and administrative expenses

       

Variable

$25,000

$28,000

$53,000

 

Fixed

$32,000

$19,000

$51,000

 

Total marketing and administrative expenses

$57,000

$47,000

$1,04,000

 

Operating income (loss)

$86,000

(24,000)

$62,000

 
         

Management is considering discontinuing the Video Recorder product line. Accountants for the company estimate that discontinuing the Video Recorder line will decrease fixed cost of goods sold by $10,000 and fixed marketing and administrative expenses by $4,000.

Reference no: EM13870894

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