Exam 5: Applications of Linear Equations

Genifax reported the following information for September: a) Determine the unit sales required to break even. b) What unit sales would generate a net income of $30,000? c) What unit sales would generate a profit of 20% of the sales dollars? d) What sales dollars are required to produce a profit of $20,000? e) If unit variable costs are reduced by 10% with no change in the fixed costs, what will the break-even point become?

M Studios estimates that it can sell 1500 camera lenses at $150 each. Total fixed costs are $120,000, and variable costs are $30 per lens. What unit sales are required to break even? What is the revenue generated if all units are sold? Use the graphical approach to CVP analysis to solve.

Solve the following set of equations graphically:

Determine the slope and y-intercept of each of the following equations: -2b + 3 = 5a

Solve the following problem using the Contribution Margin Approach. Mickey's Restaurant had a net income last year of $40,000 after fixed costs of $130,000 and total variable costs of $80,000. a) What was the restaurant's break-even point in sales dollars? b) If fixed costs in the current year rise to $140,000 and variable costs remain at the same percentage of sales as for last year, what will be the break-even point?

The monthly fixed costs of operating a 30-unit motel are $14,000. The price per unit per night for next year is set at $55. Costs arising from rentals on a per-unit per-day basis are $6 for maid service, $3 for supplies and laundry, and $3 for heat and utilities. a) Based on a 30-day month, at what average occupancy rate will the motel break even? b) What will the motel's net income be at an occupancy rate of: (i) 40%? (ii) 30%? c) Should the owner reduce the price from $55 to $47 per unit per night if it will result in an increase in the average occupancy rate from 40% to 50%? Present calculations that justify your answer.

The Armour Company had the following revenue and costs in the most recently completed fiscal year: a) What is the unit sales volume at the break-even point? b) How many units must be produced and sold for the company to have a net income of $1,000,000 for the year?

Beta Inc. has based its budget forecast for next year on the assumption it will operate at 90% of capacity. The budget is a) At what percentage of capacity would Beta break even? b) What would be Beta's net income if it operates at 70% of capacity?

Use the graphical method to solve the following pair of equations.

During an economic slowdown, an automobile plant lost $12,000,000 on the production and sale of 9000 cars. Total revenue for the year was $270,000,000. If the break-even volume for the plant is 10,000 cars per year, calculate: a) The plant's total fixed costs for a year. b) The net income if unit sales for the year had been equal to the 5-year average of 12,000.

Use the Interactive break-even Chart and its accompanying in the textbook's OLC to answer the following problem. To access the chart, follow the instructions given in the NET @ssets box at the beginning of section 5.4 in the text. Jordan is developing a business plan for a residential building inspection service he may start. Rent and utilities for an office would cost $1000 per month. The fixed costs for a vehicle would be $450 per month. He estimates that the variable office costs (word processing and supplies) will be $50 per inspection and variable vehicle costs will be $25 per inspection. Jordan would also spend $200 per month to lease a computer, and $350 per month for advertising. a) If he charges $275 per inspection, how many inspections per month are required before he can "pay himself?" b) How many inspections per month are required for Jordan to be able to draw a salary of $4000 per month?