Can someone calculate the break even analysis, thanks, thanks Break-even analysi
ID: 2623969 • Letter: C
Question
Can someone calculate the break even analysis, thanks, thanks
Break-even analysis. Binders-For-School, Inc., is in the process of determining whether to purchase a high-capacity machine to make textbooks for the upcoming school year. The high-capacity machine will generate fixed costs of $10,000 per year versus the $2,000 fixed costs of using a low-capacity machine. The variable costs per unit when using the high-capacity machine will be $30. The firm will charge $60 for each textbook and has determined that the high-capacity machine will maximize pretax operating cash flow if sales are greater than 800 books. What is the variable cost per unit under the low-capacity machine scenario?
$60
$80
$40
$20
$60
Explanation / Answer
Operating profit with high capacity machine = no of books * (sale price - variable cost) - fixed costs = 800 * (60-30) - 10,000 = 14,000
Let variable cost of low capacity machine be X.
Operating profit with low capacity machine = no of books * (sale price - variable cost) - fixed costs = 800 * (60-X) - 2,000 = 800 * (60-X) - 2,000
Equating the two, we have 800 * (60-X) - 2,000 = 14,000
Solving, we get X = variable cost = $ 40
Answer: $ 40
Hope this helped ! Let me know in case of any queries.