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Trevor, the new owner of the vehicle accessory shop is considering buying sets of winter tires for ...

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HudsonKB16:
Question 1The operating budget of the Omega Twelve Company contains the following information.

Sales at 92% of capacity $644 000Fixed costs $215 000Variable costs 373 520588 520Net income $55 480
a) Draw a detailed break-even chart.
b) Compute the break-even point as a percent of capacity.
c) Determine the break-even point in dollars if fixed costs are reduced by $11 200 while variable costs are changed to 62% of sales.

Question 2Trevor, the new owner of the vehicle accessory shop is considering buying sets of winter tires for $299 per set and selling them at $520 each. Fixed costs related to this operation amount to $3 250 per month. It is expected that 18 sets per month could be sold. How much profit will Trevor make each month?

babybsemail:
Answer 1a) Let x represent the sales volume in dollars. Total revenue: TR = x
= = 58% of revenue = 0.58
Total cost: TC = 215 000 + 0.58x





b) Using the contribution margin approach and assuming that P = $1.00, we obtain: CM = P-VC = 1-0.58 = 0.42
BE volume (in units) = = = 511904.76 = 511905 units
Capacity = = 700 000
BE volume as a percent of capacity = = 73.13%
c) FC = $203 800 and VC = 0.62, then CM = 1-0.62 = 0.38 CR = = = 0.38
BE in sales dollars
= = = $536 315.79

Answer 2VC = 299, P = 520, FC = 3 250, then
CM = P-VC = 520-299 = 221
If Volume per month is 18 units, then
PFT = CM(X) - FC = 221(18) - 3250 = $728

HudsonKB16:
Excellent

babybsemail:
Great! Please up vote :D

Ben Buckley:
Thank You

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