Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
8th Edition
ISBN: 9781285065137
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 13, Problem 1P
Summary Introduction
To identify: The break-even point.
Break-Even Analysis:
Break-even point refers to that amount, which doesn’t have an outcome of profit or loss and the difference of total revenue and expense is zero. Break-even analysis helps to find that level of sale through which the company can recover its cost and have no loss.
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A company's fixed operating costs are $310,000, its variable costs are $3.65 per unit, and the
product's sales price is $4.10. What is the company's break-even point; that is, at what unit sales
volume will its income equal its costs? Round your answer to the nearest whole number.
units
D
a.Explain why contribution margin per unit becomes profit per unit above the break-even point
b. If the contribution margin per unit is $7 and the break-even point is 10,000 units, how much profit will a firm make if 15,000 units are sold?
c.What is the variable cost ratio? The contribution margin ratio? How are the two ratios related?
PROBLEM SOLVING: (show step by step solution)
Break-even and target profits. Analysis of the operations of FAST Company shows the fixed costs to be P200,000 and the variable costs to be P8 per unit. Selling price is P16 per unit.
Derive the break-even point expressed in units.
How many units must the firm sell to earn a profit of P280,000?
What would profits be if revenue from sales were P2,000,000?
Chapter 13 Solutions
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Ch. 13 - Changes in sales cause changes in profits. Would...Ch. 13 - Would each of the following increase, decrease, or...Ch. 13 - Discuss the following statement: All else equal,...Ch. 13 - Prob. 4QCh. 13 - Which of the following would likely encourage a...Ch. 13 - Prob. 6QCh. 13 - Why is EBIT generally considered independent of...Ch. 13 - Is the debt level that maximizes a firm's expected...Ch. 13 - If a firm goes from zero debt to successively...Ch. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 1PCh. 13 - OPTIMAL CAPITAL STRUCTURE Jackson. Trucking...Ch. 13 - RISK ANALYSIS a. Given the following information,...Ch. 13 - UNLEVERED BETA Harley Motors has 10 million in...Ch. 13 - FINANCIAL LEVERAGE EFFECTS Firms HL and LL are...Ch. 13 - BREAK-EVEN ANALYSIS The Weaver Watch Company sells...Ch. 13 - FINANCIAL LEVERAGE EFFECTS The Neal Company wants...Ch. 13 - HAMADA EQUATION Cyclone Software Co. is trying to...Ch. 13 - RECAPITALIZATION Tapley Inc. currently has total...Ch. 13 - BREAKEVEN AND OPERATING LEVERAGE a. Given the...Ch. 13 - RECAPITALIZATION Currently, Bloom Flowers Inc. has...Ch. 13 - BREAKEVEN AND LEVERAGE Wingler Communications...Ch. 13 - Prob. 13PCh. 13 - WACC AND OPTIMAL CAPITAL STRUCTURE Elliott...Ch. 13 - CAMPUS DELI INC. OPTIMAL CAPITAL STRUCTURE Assume...Ch. 13 - To get an overall picture of each companys capital...
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