CPAnet Forum: Help!!Breakeven Analysis- Wiley Testlet 3

Active Topics

Memberlist

Help

BEC STUDY GROUP
CPAnet Forum : BEC STUDY GROUP

Topic: Help!!Breakeven Analysis- Wiley Testlet 3 (

Topic Closed)

Author

Message

<< Prev Topic | Next Topic >>

bullandre
Regular
Regular

Joined: 16 Jul 2009
Location: United States
Online Status: Offline
Posts: 232

Posted: 14 Feb 2010 at 01:34 \| IP Logged

Guys, "2.5X" is the target profit. Here you go:

Sales (in dollars) = (FC + Target Profit)/Contribution Margin Ratio(%)

or Sales = VC + FC + TP

Using th first formula:

25X = (585,000 + 2.5X) divided by 0.36 (CM ratio)
9X - 2.5X = 585, 000
X = 90,000

I know the answer was computed before but I just wanted to point out that "2.5X" was simply the target profit and NOT "sales price before tax", which makes no logical sense. I hope I was of help, if not, I'm willing to elaborate.

cpagirl34
Newbie
Newbie

Joined: 13 Feb 2010
Online Status: Offline
Posts: 3

Posted: 14 Feb 2010 at 19:36 \| IP Logged

Hi Everyone,

I actually solved this problem after I posted it for help. This is how I got my answer.

FC + Net Profit/Loss = CM%

First I calculated the CM%:

CM% = CM/Sales Price

CM = 25-16= 9

CM%= 9/16 = 36% or 0.36

Next, I used the algebraic approach for break even analysis.

FC + Net Profit/Loss = CM%

585,000 + 0.1X = 0.36X
585,000 = .26X
= 2,250,000 (sales dollar)

To get the units I divided it by $25 sales price

2,250,000/25

= 90,000 units.

Hope this makes sense! This was a hard one geez.

mits07
Regular
Regular

Joined: 22 Jan 2010
Location: United States
Online Status: Offline
Posts: 115

Posted: 14 Feb 2010 at 22:28 \| IP Logged

awesome job cpagirl!!! makes perfect sense now.

ssham1976
Major Contributor

Joined: 12 Apr 2009
Location: United States
Online Status: Offline
Posts: 350

Posted: 25 Feb 2010 at 22:49 \| IP Logged

Hi Everyone,

Can someone please help me with this question for Wiley 2009, Testlet #3
                                          Total Cost         Unit Cost
Sales (40,000 units)             1,000,000        &am p;nb sp; $25
Raw Materials        &am p;nb sp;         &am p;nb sp;    160,000          ; ;    4
Direct Labor         & amp; nbsp;         & amp; nbsp;     280,000          ; ;    7

Factory Overhead
Variable        & ;nbs p;         & ;nbs p;         & ;nbs p; 80,000              2
Fixed         & amp; nbsp;         & amp; nbsp;         & amp; nbsp; 360,000

Selling and general expense
Variable        & ;nbs p;         & ;nbs p;         120,000          ; ;    3
Fixed         & amp; nbsp;         & amp; nbsp;         & amp; nbsp; 225,000

12.Assume the company SELLS 80000 UNITS what is the maximum that can be paid for ADVERTISING while still break even?

The answer is : 135000

I TRIED AND CANNOT SOLVE CAN ANYONE HELP

cpagirl34
Newbie
Newbie

Joined: 13 Feb 2010
Online Status: Offline
Posts: 3

Posted: 26 Feb 2010 at 11:02 \| IP Logged

Hi ssham1976,

I was stuck on this problem for a bit too. Here is how I got the answer.

Breakeven Units = FC + Profit/ Sales - Variable Cost

Step 1

80,000 = 585,000 (360,000 + 225,000) + X / 25 - 16

Step 2: Solve for x

80,000 x 9 = 585,000 + x

720,000 = 585,000 + x

x= 135,000

Apparently the advertising cost is consider the target profit in this problem. Hope this helps!

Sorry, you can NOT post a reply.
This topic is closed.

<< Prev Page of 2

Printable version

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum