Week 5 Assignment
Instructor Assignment # 1.
1. Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000. Required: a. What is the breakeven point in batteries? b. What is the margin of safety, assuming sales total $60,000? c. What is the breakeven level in batteries, assuming variable costs increase by 20%? d. What is the breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed costs decline by $100? Answer: a. The breakeven point in batteries is: $30X-$20X-$18,000=0 $10X-$18,000=0 $10X=$18,000 X=$18,000/$10 X=1,800 batteries The breakeven point in batteries is 1,800 batteries. b. The margin of safety, assuming sales total $60,000 is: $30*1,800 batteries=$54,000 $60,000 – ($54,000) The Margin of safety assuming sales total $60,000 is $6,000. c. The breakeven level in batteries, assuming variable costs increase by 20% is: VC=$20*1.20 VC=$24 $30X-$24X-$18,000=0 $6X-$18,000=0 $6X=$18,000 X=$18,000/$6 X=3,000 batteries. The breakeven level in batteries, assuming variable costs increase by 20% is 3,000 batteries. d. SP=$30*1.10 SP=$33 Manufacturing FC=$10,000*0.90 Manufacturing FC=$9,000 OtherFC=$8,000-$100 OtherFC=$7,900 $33X-$20X-$9,000-$7,900=0 $13X-$16,900=0 $13X=$16,900 X=$16,900/$13 X=1,300 batteries The breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed
1. Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000. Required: a. What is the breakeven point in batteries? b. What is the margin of safety, assuming sales total $60,000? c. What is the breakeven level in batteries, assuming variable costs increase by 20%? d. What is the breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed costs decline by $100? Answer: a. The breakeven point in batteries is: $30X-$20X-$18,000=0 $10X-$18,000=0 $10X=$18,000 X=$18,000/$10 X=1,800 batteries The breakeven point in batteries is 1,800 batteries. b. The margin of safety, assuming sales total $60,000 is: $30*1,800 batteries=$54,000 $60,000 – ($54,000) The Margin of safety assuming sales total $60,000 is $6,000. c. The breakeven level in batteries, assuming variable costs increase by 20% is: VC=$20*1.20 VC=$24 $30X-$24X-$18,000=0 $6X-$18,000=0 $6X=$18,000 X=$18,000/$6 X=3,000 batteries. The breakeven level in batteries, assuming variable costs increase by 20% is 3,000 batteries. d. SP=$30*1.10 SP=$33 Manufacturing FC=$10,000*0.90 Manufacturing FC=$9,000 OtherFC=$8,000-$100 OtherFC=$7,900 $33X-$20X-$9,000-$7,900=0 $13X-$16,900=0 $13X=$16,900 X=$16,900/$13 X=1,300 batteries The breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed