COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
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A company has fixed costs of $1.3 million. Variable costs are 55% of sales up to a sales level of $1.5 million, but at higher volumes of production and sales, the variable cost for incremental production units falls to 52% of sales. What is the breakeven point in sales revenue, to the nearest $1, 000?
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1, 977, 000
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2, 027, 000
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2, 708, 000
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2, 802, 000
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Explanation:
Detailed explanation-1: -First, add up all of your production costs. Make sure to be clear about which costs are fixed and which ones are variable. Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost.
Detailed explanation-2: -Fixed cost = Total cost of production-(Variable cost per unit x number of units produced)
Detailed explanation-3: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.
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