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Break-Even Analysis Worksheet (ACCT-221)

1. Fixed Cost = $100,000
Variable Cost = $50/unit
Number of units produced = 1000
Depreciation expense = $25000
Revenue = $350000
GST/PST = $52500

Based on the data above, compute the following:

a. The contribution margin
b. The PV ratio
c. The net income
d. The break-even revenue
e. The cash break-even point

2. Fixed Cost = $50,000
Variable Cost = $10/unit
Contribution margin = $80,000
Units produced = $10,000

Based on the data above, compute the following:

a. The total sales revenue
b. The PV ratio
c. The break-even revenue
d. The break-even point in units
If the owner wants to make $100,000 profit, what will be the new break-even point in units?

3. Which of the following are classified as fixed cost or variable cost?

a. Freight cost __________
b. Office leasing __________
c. Office salaries __________
d. Commissions __________
e. Purchases __________
f. Traveling costs __________
g. Depreciation __________
h. Bank interests __________

4. Describe the difference among a fixed cost, a variable cost & semi-variable cost. Give an example of each type of the cost.

5. Define the importance of a break-even analysis to a company's budget planning.

6. If the PV ratio is 0.75 and the contribution margin is $30,000, what will be the total sales revenue? What is the significance of computing the contribution margin?

7. If the net loss of a company is $40,000, its fixed cost is $200,000, and $40,000 units are produced, what should be the contribution margin per unit?

8. If the contribution margin is $50,000, the variable cost is $100,000, and the selling price is $15 per unit, how many units were produced?

9. What is the difference between cash break-even point, and normal break-even revenue? What cost is excluded when computing the cash break-even point?

Answers:

1. Contribution margin = $300,000
PV Ratio = 0.8571
Net Income = $200,000
Break-even revenue = $116,666.67
Cash break-even point = $87,500

2. Total sales revenue = $180,000
PV Ratio = 0.4444
Break-even revenue = $112,500
Break-even point in units = 27,778 units
New break-even point in units = 83,334 units

3. Variable
Fixed
Fixed
Variable
Variable
Fixed
Fixed
Fixed

4. Check textbook for definitions

5. Check textbook for definitions

6. Total sales revenue = $40,000
The contribution margin is the amount that can be used to cover the fixed cost and possible profits.

7. Contribution margin per unit = $4 per unit

8. 10000 units

9. Cash break-even point only involves accounts that have a cash flow. Depreciation cost/expense is excluded when computing the cash break-even point.

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