Break Even Analysis

Solution is available here for U$10.00

1. Potential applications of break-even model include: (Points : 1)       Replacement for time adjusted capital budgeting techniques       Pricing policy       Optimizing the cash marketable securities position of a firm       All of the above

2. Benkart’s Tie Store has fixed costs of $180,000. Tires sell for $75 each and have a unit variable cost of $30. What is Benkart’s break-even point in units? (Points : 1)       4,000       6,000       7,200       8,500

3. Which of the following statements would be consistent with the Dividend Irrelevance Theory? (Points : 1)       There is no relationship between a firm’s dividend policy and the value of its common stock.       Perfect capital markets are assumed to exist which allow investors to buy and sell stock without incurring any transaction costs.       Investors are indifferent whether stock returns come from dividend income or capital gains income.       All of the above.

Break Even Analysis

Solution is available here for U$0.50

1. A project has a fixed cost of $73,000, variable costs of $9.20 per unit, and generates sales revenue of $15.40 per unit. What is the break-even point in unit sales, where accounting profit exactly equals zero, and what is the intuition for it?

2. Suppose a firm is considering the following project, where all of the dollar figures are in thousands of dollars. In year 0, the project requires $24,490 investment in plant and equipment, is depreciated using the straight-line method over seven years, and there is a salvage value of $5,800 in year 7. The project is forecast to generate sales of 4,800 units in

Break-even charting and cost-plus formula

Solution is available here for U$1.00

The level of fixed costs (salaries, rent, and utilities) necessary to run my coffee shop on a monthly basis is $9,000. In addition, a cup of coffee sells for $1.25 costs $0.25 for the bulk coffee, filters, and water.
The contribution margin of a cup of coffee is, therefore, $1.00. I can now calculate how many cups of coffee I have to sell to cover my fixed costs:

Break-Even = (Fixed Costs) / (Contribution Margin)
= $9,000/$1.00 = 9,000 cups of coffee per month