13-5. Howard Beal Co. manufactures models for casting aluminum alloy test samples.

Fixed costs amount to $20,000 per y a. What is the contribution margin of the product? b. Calculate the breakeven point in unit sales and dollars. c. What is the operating profit (loss) if the company manufactures and sells (i) 1,500 units per year? (ii) 3,000 units per year? d. Plot a breakeven chart using the foregoing figures.

Sales per Unit Varaible Costs (VC) Fixed Costs (FC)

$28 $16 $20,000 Unit

Time Year

Unit Start 0

Sales $0 $14,000 $28,000 $42,000 $56,000 $70,000 $84,000 $98,000 $112,000 $126,000 $140,000

Varaible Cost $0 $8,000 $16,000 $24,000 $32,000 $40,000 $48,000 $56,000 $64,000 $72,000 $80,000

a. Calculating the contribution margin of the product Contribution Margin of the $12 porduct (CM) b. Calculating the breaking point in unit sales and dollars Breakeven point in unit sales 1667 Breakeven point in dollars $46,676

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

C. Calculating the operating profit (loss) if the company manufactures and sells: (i) 1,500 units per year 1,500 Operating Cost (TC) = FC + $44,000 (VC * Q) Unit Sales (Quantity Sold) = Q 1,500 Total Revenue (TR) = p*Q $42,000 ($2,000) Operating loss = (ii) 3,500 units per year Operating Cost (TC) = FC + (VC * Q) Unit Sales (Quantity Sold) = Q Total Revenue (TR) = p*Q 3,000 $68,000 3,000 $84,000

Break Even Analys

Sales $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 0 1000 2000 Fixed Cost

$0

Operating Profit =

$16,000

1000

2000

21-1. Mrs. Pittner owns 100 shares of stocks in Nokia valued at 6.5 euros per share what is the value (in U.S. dollars) of a. .90 = /$ b. .70 = /$ c. 1.2 = /$

Amount of Stock owned = Value of Stock in euro =

100 6.50

a. value of stock is exchange rate is .90 /$

Exchange rate = Value of Stock in U.S. dollar =

0.90 7.22

b. value of stock if exchange rate is .70 /$ Exchange rate = 0.70 Value of Stock in U.S. dollar = $ 9.29 b. value of stock if exchange rate is 1.2 /$ Exchange rate = 1.20 Value of Stock in U.S. dollar = $ 5.42

21-12. John is planning on purchasing his dream car directly form the manufacturer in Germany. In order to do so, he must How much does he need in U.S dollar to purchace his car if the exchange rate is .9800 euros to the dollar?

Calculating the amount of U.S. dollar needed to purchase car: Price of car in euros = 55,150.00 Exchange rate of euros to U.S. 0.98 dollar = $ 56,275.51 U.S. dollars needed =

osts amount to $20,000 per year. Variable costs for each unit manufactured are $16. Sales per unit is $28.

Unit Increments Unit Price 500 $28

Unit Varaible Cost $16

Total Fixed Cost 20,000.00

Varaible Cost $0 $8,000 $16,000 $24,000 $32,000 $40,000 $48,000 $56,000 $64,000 $72,000 $80,000

Contribution Margin $0 $14,000 $28,000 $42,000 $56,000 $70,000 $84,000 $98,000 $112,000 $126,000 $140,000

$ $ $ $ $ $ $ $ $ $ $

Fixed Cost 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000

Total Cost $ 20,000 $ 28,000 $ 36,000 $ 44,000 $ 52,000 $ 60,000 $ 68,000 $ 76,000 $ 84,000 $ 92,000 $ 100,000 Break Even Point X 1667

Net Income ($20,000) ($14,000) ($8,000) ($2,000) $4,000 $10,000 $16,000 $22,000 $28,000 $34,000 $40,000 Break Even Point Y 46676

Break Even Analysis

Total Cost Break Even Unit Approx. =1667

Formula: Solving for Units 0 = Units*(S-VC) -FC FC = Units*(S-VC) Units = FC/(S-VC)

3000

4000

5000

6000

3000 Unit

4000

5000

6000

e value (in U.S. dollars) of Mrs. Pittner shares of stocks when the exchange rate is

ny. In order to do so, he must first convert his dollars to euros . His dream car has a price tag of 55,150 euros. to the dollar?

eak Even Point Y 46676

Label Break Even Unit Approx. =1667